Blame the weather

Why Osborne's excuse that snow is to blame for the collapse in economic growth is comedy material.

Britain's economy contracted 0.5% in the last quarter, the most in a year, according to the latest from the Office for National Statistics.

While everybody agrees the figures are evidence of a double-dip recession on its way and even the CBI boss accuses the government of "lacking vision" ("Measures that cut spending but killed demand would actually make matters worse", in the words of Sir Richard Lambert), Chancellor George "Trustfund" Osborne had the cheek to seriously blame last month's snowfall and cold temperatures.

No doubt because he had first-hand experience of both.

But let's just suppose Osborne was right. At the end of the day, it is true that last December was the coldest on record.

It still isn't enough to explain entirely such a massive slump to the point of also cancelling out completely October and November.

The truth is that no amount of comical excuses from Britain's Chancellor will cover up for the devastating decisions they've inflicted on the country.

And a simple comparison will be enough to expose his bullshit for what it is.

December 2009 was also an extremely cold month. Granted, not as extreme as December 2010, but still the Met Office described it as the coldest on record since 1995, with heavy snowfalls and widespread disruption to the economy.

Yet that didn't prevent the economy from growing last year for the first time in six quarters (see this).

More. Look at January, February and March 2010. The three combined were all much colder than usual (January in particular was "the coldest over the UK since 1987 and equal eighth-coldest in a series from 1910") and each of them was officially listed as "anomalies" in terms of mean temperatures.

Guess what? The economy grew over that quarter too. No mention of bad weather there, eh?

The truth is, Osborne is useless and this government is so inept that they would still deny a piece of evidence if it stared at them in the face with a sign that said "evidence".

The relentless rise of transport fares

Why the periodical calls of "spend and save the economy" are grating and snobbish in the extreme.

Over the Christmas period, you may have overheard various pontificators telling the populace to spend, spend, spend in order to "save the economy".

With what money though, they never say. Look at the figures.

According to the Office for National Statistics, salaries in Britain went up in 2010 by 2.3%, less than the current rate of inflation which now stands at 3.2%.

That looks positively tame when you consider the inflation-busting rises ordinary people are having to deal with whichever direction they look.

Transport fares, for instance. As of yesterday, they went up across the whole country. In Birmingham, adult bus fares increased by 5.55%, daysavers rose by 8.3% (they now stand at £3.60) and the precious evening savers were done away with altogether (see here for full details).

Of course, like each and every single time fares go up, transport companies justify the policy by playing the usual old record of "rising business costs", "massive reinvestment" and "new vehicles".

Yet, an external observer may be excused if he or she expects those buses to be powered by Ferrari, paved with gold, and sporting a crew of smiling hostesses dispensing free drinks to cheer you up on your ride to work. Because since 2005 tickets on the former Travel West Midlands and current National Express West Midlands have gone up by a mental 80%. That is eighty-per-cent, from £1 five years ago to the current £1.80.

Top executives aside, hands up anybody if your wages have gone up by anything remotely like that. The most recent minimum wage increase, for instance, was a meagre 2.19%.

So, when Chancellor George Osborne returns from his "luxury break" at Prince Charles’s favourite ski resort, can any journalist with a pair please ask him what advice he's got for the millions of low wage workers facing galloping costs eating further into their wages?

What is Germany doing that we aren't?

Germany has recovered from the recession faster than any other country. Here is why.

The days when Tony Blair was lecturing various EU countries on the importance of adopting the Anglo-Saxon model of beefed-up finance are now long gone.

When the biggest global recession in decades kicked in, Germany was able to weather the storm and recover much quicker and better than Britain, the US, or any other major Western economy.

Some of the reasons may be too complex for the scope of a blog post. Yet it's interesting that, while successive UK governments spent the last three decades actively pursuing overreliance on bullshit economy, Germany did not fall for short-termist solutions.

For one thing, not giving up on its manufacturing is certainly reaping the harvest now - look at how its booming export sales are proving the country's biggest asset as the Germans are getting out of recession faster than anyone else.

And so a number of legitimate questions arise. Why is it that after registering a slump of -4.7% last year, Germany is now forecast to end 2010 with a GDP growth of 3.6%, its fastest pace since reunification, while Britain is still finding its feet?

And why is it that while unemployment is still rising or stagnating in the US, Britain or other EU countries, the figures are going down fast and steady in Germany?

During the bubble years, Blair and Brown could at least boast that the UK's jobless figures were regularly lower than the rest of Europe. And it was true. Between 2000 and 2007, unemployment in Britain was never any higher than 5.5% (see this) while, in the same period, the German figures were regularly double that rate - between 8 and 10 per cent (see this).

Now look at the last two years. UK unemployment has overtaken Germany's at a hair-raising pace. While the jobless rate in Britain is now tickling 8 per cent, in Germany it decreased to 7.3 per cent at the start of 2010 and then further lowered to 6.7% in October (see this) - again, its best figures since reunification.

So what are the Germans doing that we're not, to the extent that many analysts are now openly talking of a "German Miracle"?

The answer lies in a policy that the German government adopted at the start of the crisis. It's called kurzarbeit and it literally means "short work". While other countries spent unprecedented sums on bailing out banks or dubious stimulus programmes, Chancellor Angela Merkel’s government (at the time a coalition of centre-right CDU and centre-left SDP) took a unique gamble by spending huge sums bailing out its work force.

And that's because, under kurzarbeit, employers hit by the downturn are encouraged to keep their workers part-time rather than make them redundant. The Federal Employment Agency (Bundesagentur für Arbeit) will cover up to 67% of lost wages and will also take care of national insurance and other contribution. The idea is that:

a) mass redundancies often mean a permanent loss of skilled work and specialised trade, especially in the industrial sector. By keeping workers active through a combination of part-time and training, the economy benefits the moment trade picks up - which is exactly what happened as Germany boomed in 2010;

b) the focus on employment and wages spared the country a vicious circle of mass unemployment leading to a drop in both tax revenue and consumer confidence - in turn leading to vast numbers of people defaulting on their mortgages and loans. In other words, as the money reaches consumers directly, it flows back into the market straightaway.

This may look expensive at first (£5.1bn a year), but it saved Germany a fortune in both welfare costs and bailing out banks.

Compare what Germany spent on their bail-out: 1.4% to 2.2% of gross domestic product (between €34bn and €52bn). In Britain it was a staggering 19.8%, almost a fifth of its GDP - and that's before the official cost was actually discovered to stand at an even higher £850bn.

Of course, the experiment is not without its critics. From the left, it's often said that Germany's recovery has taken place at the expense of the rising numbers of low-wage workers and unprecedented wage restraint. From the right, the objection that kurzabeit would simply lead to "a backlog of job cuts", to quote what the president of the German Bundesbank said last year.

And yet, time is showing that Germany's route to recovery is the correct one. According to the Organisation for Economic Co-operation and Development (OECD), the kurzabeit scheme saved nearly 500,000 jobs in 2009 alone and two months ago the German Upper House Bundesrat decided to extend it until March 2012.

More recents news report that Germany's industrial sector is currently in need of 34,000 engineers and 23,000 factory workers.

Indeed, a German success story.

A 1p tax on text messages?

Almost 100 billion SMSs were sent last year in Britain alone. If it's true that the deficit matters, then do your maths.

In an interview in today's Guardian, union leader Bob Crowe mentions in passing that he'd "put a 1 pence tax on every text message that's sent in Britain", arguing that "[the measure] would nearly wipe out half the deficit".

Crowe may be a little over optimistic on the figures, but the idea is certainly spot on.

Last year, 96.8 billion text messages were sent across Britain, an increase of 23% on 2008 - and that's without counting 600 million picture messages on top.

The Office for National Statistics said that "[t]he current budget (excluding financial interventions) showed a deficit of £7.1 billion in October 2010".

A significant portion of that money could be recovered in one fell swoop, as it's highly unlikely an extra 1p per text would impact significantly on the billions of SMSs being sent each day. It'd be certainly infinitely less intrusive than many of the austerity measures this government is taking.

If it's true that Britain's financial emergency can warrant half a million people being made redundant and cuts to the tune of £330m in councils like Birmingham, then what is an extra 1p per text or picture message if it can rake in (at the very worst) over £1bn in just a year?

Research says tuition fees scheme unfeasible

If the Coalition were so convinced their new tuition fees package was so fair, why are they rushing to introduce last minute sweeteners?

In an interview published yesterday by the Independent on Sunday, Deputy PM Nick Clegg reiterated the fable that the government's plan to hike tuition fees up to £9000 are "brave and bold and [a] socially progressive thing to do".

But if it was so socially progressive - which the LibDems claimed from the off - why is the Coalition feeling the urge to announce a last minute £150m scholarship fund to cover first year's tuition fees for less well-off students?

Either way Clegg didn't explain how poorer students will manage to make it to their A-levels, let alone university, given that the Coalition is proudly scrapping the EMA (Education Maintenace Allowance) for all students aged 16 to 19.

It's also interesting how the Tories' latest recruit keeps drawing specific examples of how much better off certain students will be with the new higher education scheme, while also steering well clear of explaining that in 60-65% of the cases students will be worse off - as recently highlighted by a number of studies.

The strongest indictment of the Coalition's ineptitude, however, comes from the fiscal side of things.

After both the Higher Education Policy Institute and the Institute for Fiscal Studies raised objections to the feasibility of the Coalition's proposals, a new study by consultancy firm London Economics adds that on top of impacting "adversely on social mobility and participation", the government's plans "will have to be covered by huge increases in borrowing to fund much larger student loans".

The report reiterates the point we made last Saturday: the Coalition's plans will not save the taxpayer a single penny. Quite the opposite. The Government will have "to borrow £10.7 billion to fund student loans in 2015/16 compared to the £4.1 billion it borrowed in 2010/11. If the Government’s plans are voted through, they will add a whopping £13 billion to public sector net debt by 2015/16".

"The plans are really a case of robbing Peter to pay Paul", was the comment of Pam Tatlow, Chief Executive of university think tank Million+.

The risks of a system replicating a miniature-style financial crash within a few years' time are obvious. Researchers explain how huge chunks of future graduates will never repay the full whack, many entering the 30-year write-off period with tens of thousands of pounds still outstanding.

In the summer of 2009, it had already been noted that "out of 1.4million graduates who started university in 1998 or later, 49 per cent were earning too little to pay back their student loans".

As regards tuition fees, 43 per cent of the most recent crop of graduates had not reached the current repayment threshold of £15,000, leading to the "doubling in five years" of outstanding student debt.

With the Coalition's new regime of trebled tuition fees and a higher threshold, the implosion of the whole further education system doesn't look unlikely.

Cliches of 2010 #4

"Society as a whole benefits from extreme wealth at the top".

You've heard it time and again. Believers in the Ideology of Number One tend to cling onto the moral justification that obscene levels of wealth will inevitably "trickle down" to the rest of society - as famously spelt out by Ronald Reagan in 1981.

"Cut tax on the rich and turn a blind eye on tax avoidance and even you, overworked, casual and on low pay will feel better off".

According to the Believers, the super wealthy generate employment and investments and make people like Tony Blair and Peter Mandelson feel tremendously excited.

However, if the Believers were right, the last 30 years (which have been extremely generous to the "wealth creators") wouldn't have resulted in such a steady decline of real wages and salaries for the poorer half of the population (see this).

The binge in corporate profits has been inversely proportional to salaries paid to ordinary mortals. Wages as a proportion of national GDP went from a peak of 64.5 per cent in the mid-1970s to 53.2 per cent in 2008 (link- see figures 1, 2 and 4).

In Britain, the bottom 50% now own a staggeringly low 1 per cent of the country's "marketable wealth". The only thing ordinary workers have seen increase is personal debt which tripled in the last ten years (see this - page 2).

Quite simply, there is no correlation whatsoever between the fortunes of the most loaded and the rest of the country. In fact, maybe there is, but in reverse.

If still in doubt, just look at this simple fact: in 2009, at the height of the biggest economic crisis in decades, "the 1,000 richest people in the country increased their wealth by £77 billion". It was, according to the Sunday Times, "easily the biggest annual rise in [...] 22 years".

No wonder the usual suspects froth at the mouth when the prospect of higher tax rates for the rich and a clampdown on tax avoiders is even mentioned. It would be tantamount to disaster, vandalism and "plundering from career politicians", they say - quoting psalm after psalm from The Free Market Bible.

So-called "wealth creators" in Britain have never had it so good. The most devastating economic crash happened under a system with low corporation tax, a reputation for low tax on the wealthy, tax havens in Crown dependencies (see this), the most flexible labour market in Western Europe and a property system inviting speculation with open arms.

For some, it's never enough.

PREVIOUS CLICHES:
#3 "There are jobs out there if you really want one".
#2 "The Royal Family brings in tourism revenue".
#1 "Iain Duncan Smith is a kind and honourable man".

Blinkered by ideology

Tory attacks on the Euro in the wake of the Irish bail-out display a scary concoction of goldfish memory and totemic dogma.

The recent bail-out for the Irish Republic, in which the EU and the IMF will lend 90bn euros (£77bn) and the UK about £7bn, has triggered a textbook case of rampant ideological poison.

Instead of focusing on the blatant Tory faux-pas of hailing last year's savage cuts in the Republic (look at this gem here, absolutely priceless), the rampant ideologues are now clinging on to a convenient red herring: the Euro -- that is to say, one of their top ideological pet hates.

Enter uber-Tories like eurosceptic fundamentalist Dan Hannan MEP, whose blog on the Telegraph website oozes more totemic certainty than a North Korean ideological textbook. Apparently, Ireland is in a rut simply because of the Euro (here) and supporters of the Euro should apologise (here).

Now, this blog here is not particularly keen on the Euro either.

But it's ridiculous, nothing less, that some people can cling on to such levels of ideological blindness without even remotely pretending to be looking at the facts.

Suddenly it's as though the crash that sent shockwaves across the planet had never started in the US (currency: the Dollar) and never required a bailout that cost well into the trillions.

It's as if the UK (currency: Pound Sterling) did not need a mammoth £850bn to hold off the most devastating domino effect in history in the wake of a fat bubble that lasted until 2008.

It's as if Dubai (currency: the UAE dirham) did not see its property bubble burst last year, and Iceland (currency: Icelandic Krona) did not experience patterns familiar to the Irish -- unprecendented expansion followed by near bankruptcy.

Robert Peston made the point on the BBC website that what happened across the Irish sea wasn't miles away from Britain's problem. Literally.

It's a fact that some of the biggest casualties of the crisis were not part of the Eurozone, while others where (Greece, Ireland). Similarly, some of the countries that best weathered the storm were in the Eurozone (look at Germany and France) and some weren't (Denmark, Sweden).

No pattern was related to either currency or scale of the economy. Like Philippe Legraine wrote in the Financial Times, the only thing all the major victims have in common is a background of predatory lending which fuelled unsustainable levels of financial and property speculation.

I didn't vote LibDem for this

Axing hospitals, jobs, help for the unemployed, manufacturing projects and front line services: this cull is coming straight from the most ideological right-wing hymnsheet.

Commenting on cuts and "difficult budget decisions", Deputy PM Nick Clegg said recently that his government would "not" do it "the way we did it in the 80s". "We're going to do this differently", he remarked.

The acute observer, however, may have learnt the bitter way that, whatever the Lib Dem leader says, the exact opposite is true. In fact, his public declarations read in reverse should be coveted as the best way of predicting government policy.

And so, yesterday's announcement that projects worth £2bn are getting axed (with another £8.5bn suspended) is a clear sign that, for all Clegg's posturing, the 80s are actually back with a vengeance.

To quote Chris Dillow, "[W]hen Clegg says he’s going to do things differently from Thatcher, he’s right - he’ll cut overall spending by much more than she did".

The significance of yesterday's cuts is immense. It offers a clear glimpse of the ideological direction taken by the Con/Dem administration.

The Coalition are not cutting back on things such as council-funded festivals, public-funded anti-obesity ads or - even better - the salaries handed on a tray to the Chief Executives of Network Rail or the Royal Mail.

No. The axe is falling on public projects which were crucial in both the public and private sector. Cuts are going to affect job creation (mostly in the private sector), 21st century manufacturing, the health service and measures to help the unemployed.

Those include scrapping a much needed new hospital in the North-East and cutbacks on the Future Jobs Fund, a scheme that was created during the recession to help the long-term unemployed with jobs or training.

But probably even more significant was the massive blow dealt to manufacturing firm Sheffield Forgemasters.

Their £80 million loan would have created skilled jobs and stimulated the supply chain in low carbon power generation. It was a good investment both in terms of future green technology and long-term support of a specialised UK company with only one direct competitor in the field of heavy steel forgins and steel castings - in Japan. Other foreign companies will soon be vying to fill the gap.

Quite clearly this government is not interested in diversifying the economy away from the financial sector. They are repeating the short-termist mistakes that led us to the crisis in the first place. They are not interested in a forward-thinking manufacturing base and they have no plan for growth other than praying that their Ideological Hymnsheet may deliver the goods.

And the 11th Chapter, first epistle to the Free Marketeers, Verses 2-16 states clearly that the government shouldn't invest in manufacturing and that mass unemployment is a price worth paying. Amen.

Would we have 'cuts' had it not been for the bank bailout?

Read the papers and it's as if the real reason behind the "drastic" cuts in public spending, the big bank bailout, never happened.

Just a passing thought.

In the past few days, Prime Minister David Cameron and his coalition chums have been warning of "drastic" measures and "decades of pain" as the £6bn cuts get underway in an attempt to rein in the country's £156bn annual deficit .

Cameron admits that the decisions "will affect every single person" (though I'm sure he's hardly going to trade that radiator for an extra jumper himself). However, he's also very clear in laying the blame on the previous Labour government and their "reckless" spending.

But here's the thing.

Less than two years ago, at the height of the financial crisis, the Labour government pumped £37bn directly into the banks. Earlier on, an estimated £50bn had already been spent to rescue Northern Rock (fine purveyors of high-risk 110-per-cent mortgages) from disaster.

That alone would cancel out the forthcoming "drastic" cuts by a mile. Do you hear anyone talking about it?

Not to mention the gigantic £850bn announced at the end of 2009, the official cost to the British taxpayer that included - amongst other things - buying duff shares off banks, indemnifying against losses, providing guarantees and insurance cover for assets.

Yet - in a textbook case of collective goldfish memory - this now seems to have slipped away from public consciousness. It's been literally sanitised from the dominant discourse. It's as if it never happened. The only thing that happened, apparently, was a "reckless" Labour government living beyond its means and wasting homongous amounts of money.

That they did that to rescue "reckless" banks is not something David Cameron will remind you of.

Nationalism: BP's desperate card?

Don't let anybody tell you that nationalism and big capital don't match.

Look at how BP's PR machine is turning the whole thing around. And with some success too.

What started on April 20 with an oil rig explosion and the death of 11 workers, quickly turned into one of the most devastating environmental catastrophes ever. It is estimated that 40,000 barrels a day have been spilling into the Gulf of Mexico.

The consequences for the environment and local economy (and when we say "local" we mean the equivalent of a semicircle going from Cornwall all the way to East Anglia) are devastating. Millions of people depending on fishing and tourism, the two most obvious areas that spring to mind, are obviously very concerned.

For the record, BP encountered hostility because: 1) evidence of criminal negligence is gradually surfacing (regarding cost cutting and lax security measures); 2) the company has been fined several times in recent years for negligence over, again, security, safety hazards and environmental crimes in the US; 3) in the wake of the accident, company's CEO Tony Hayward came up with one tactless comment after the other and got lambasted for lacking empathy.

Now, bear in mind that BP shares started nosediving straight after the accident and continued to do so after each attempt at cleaning up failed and each time Mr Hayward engaged in inept remarks.

On June 1, BP shares already lost 34 per cent of their value before the spill.

Obama's notorious "whose ass to kick" and "he wouldn't work for me" remarks didn't take place until June 8. Shares kept plunging until they reached half their original value, but to say the President is responsible is a complete smokescreen.

So what happened? When it was clear that "ordinary" PR couldn't cut it on behalf of BP, aid came in the guise of the "patriotic" card. And it worked.

Just look at it. In the past few days, the focus has shifted completely. It is no longer on the environmental tragedy, its impact on millions of lives, the clean-up and BP's obvious responsibilities.

Boris Johnson and Lord Tebbit accused Barack Obama and the Americans in general of anti-British rhetoric, "buck-passing and name-calling", even though the buck does indeed stop at BP.

Tebbit, in particular, called Obama "despicable", unleashed accusations of "anti-BP rhetoric" and putting BP pension schemes at risk, as he kick-started the game of "whataboutery" that the "Americans too" have caused environmental disasters in the past (and?).

On Thursday night's BBC Question Time the rhetoric had hit such crass levels that panel member Toby Young ("journalist and author") got a round of applause by saying that "if you wanna see some ass kicked you should tune into the England v USA World Cup game on Saturday".

Never mind questions should be raised about a messed-up system where millions of pensions are literally left to the gambling world, just blow the dog whistle and start mentioning "British interests" (to be read in a manly, gravely voice)...and that's it, people's attention is easily sidetracked.

So imagine that. Basically Barack Obama, his administration, and the millions of American citizens affected by BP's ineptitude, should just say: "don't rush, BP. No sweat. We know some British pension schemes are invested in BP, so just leave it. Actually, have one on us".

A Tory government will mean the end of the minimum wage

If the Conservatives were still in power and the NMW had never been introduced, a typical low-paid worker would now earn £1-60 instead of £5-80 an hour.

Miles of newspaper colums and multiple television hours have been so far dedicated to anything from Sarah Brown's toes to Nick Clegg's great-great-aunt. There have been debates about tax, cuts, immigration and education, the NHS and Trident.

One crucial subject, however, has been notable by its absence. The Conservatives know that they would shoot themselves in the foot if they spoke out on it (Chris Grayling may have taught them a lesson) and Labour are too much in disarray to clock it. We're talking about the minimum wage.

In an interview with the Observer in 2005, David Cameron implied that his and his party's long-term extreme opposition to the minimum wage had been wrong. "It turned out much better than many people expected, including the CBI", he said.

But those few words are hardly reassuring against a sea of Conservative hostility that started in the 1990s and continues to this day.

Introduced in April 1999 and hailed as one of New Labour's best policies, the minimum wage was designed to rescue workers from slave-like wages - as little as 35p an hour. I remember vividly hopping from agency to agency in 1997 being offered a selection of jobs that would pay up to £2 an hour, meaning guaranteed poverty and hardly an incentive to punctuality, motivation and professionalism.

Ideologically, the Conservatives see nothing wrong with rock-bottom wages. They would moan about "a lifetime on benefit" but they would also fight tooth and nail to preserve the scandal of companies profiteering on borderline slave labour.

Glaze-eyed, they would recite from their ideological hymnsheet that the-market-regulates-itself (I suppose like bankers regulate their own bonuses), that it's-a-consensual-agreement (of course- a desperate casual worker has the same negotiating power than a multinational company), and that you can always find a job that pays better if £1 an hour doesn't suit you (but then they'll moan that migrants "have stolen all our jobs").

In 1999, like true Prophets of Doom, the Conservatives repeated that a NMW would stop foreign investors from setting shop in Britain, meaning higher unemployment and the collapse of businesses. One of their MPs said: "The minimum wage would condemn hundreds of thousands to the dole queue".

Of course that never happened. More jobs were created after the minimum wage was brought in. Over one million people, the majority of which women, benefitted instantly from a pay rise and were able to see a little improvement in their living standards. Still shitty wages, but clearly better than before.

Yet the Tories' Parliamentary record is there for all to see. They were hysterical when the minimum wage was implemented. They frothed at the mouth each time it was raised to catch up with the inflation.

The inflation-rate calculators say that, if the Conservatives were still in power and the NMW had never been introduced, a typical low-paid worker would now earn £1-60 instead of £5-80 an hour.

But there's more. The Conservatives may have done it on the quiet because it's electorally suicidal, but they campaigned to water it down as recent as 2009. Christopher Chope MP introduced a Parliamentary Bill calling for a "minimum wage opt out". He remarked that it should be "a basic human right" for people to be paid less than the minimum wage.

Senior Tory sources disclosed last year that a Tory government would allow the minimum wage to melt away. "We need to find ways of helping British business to remain competitive. The minimum wage won't be scrapped but it will be allowed to wither on the vine".

In October 2009, this was confirmed by an article in the Telegraph which called on David Cameron "to do more than slow the growth of the minimum wage – he needs to commit to putting it into reverse", repeating the old mantra that "[i]n the depths of a recession, it acts as a real barrier in getting people back to work".

Ominously, at the final Leaders' Debate on Thursday, David Cameron repeatedly stated that a Conservative government would cut down on "business regulation".

You've seen how ferociously the Conservatives are opposing a 1% National Insurance rise on employers.

Can you really picture the same people raising the minimum wage each time the inflation goes up? If, like me, you've experienced the depression of being paid as little as £2 an hour, remember that on May 6.

The minimum wage does NOT affect unemployment

Debunking the ongoing proto-Tory myth.

The debate that followed this article on apprenticeships and youth unemployment was hijacked by the Anti-Minimum Wage Crew.

Reprising an argument he'd already put forward here and here, Tim Worstall argued that countries like Denmark and Sweden have lower unemployment rates, including amongst the young, because "[N]either have a national minimum wage".

Worstall is spot-on when he argues that: "[O]ne of the vile things about the UK's current taxation system is that it reaches so far down the income scale [and that] it's possible to be working part-time on the minimum wage and be paying income tax". But the problem there is the tax system, not the minimum wage.

Which is why Worstall is wrong when he writes that "there really is an unemployment effect" caused by the minimum wage, effectively echoing what the Conservatives (including a younger David Cameron) were saying when the Minimum Wage Act was implemented back in 1999: "it would send unemployment straight back up". It never happened.

The argument is flawed on so many levels that it's even difficult to know where to begin. Especially because the causes of unemployment are so complex, both politically, geographically and historically, that it's actually unfair to point at black and white causes and solutions.

Either way, for a libertarian to cling on to Denmark and Sweden as market models is quite peculiar. Redistribution there may not take place in the flimsy guise of a National Minimum Wage, but their top tax rates would cause a free marketeer a seizure. It's 58% in Denmark and 55% in Sweden.

The whole ratio behind the introduction of a National Minimum Wage in the UK was precisely to enable people to earn something closer to "a living", without affecting the overall tax structure.

Also, Denmark may not have a state-imposed National Minimum Wage, but that's because there is already one that was privately knocked out together by the Danish Trade Unions and the employers' organisation covering 81 to 90 per cent of the national workforce. Incidentally, it is so low that virtually all Danish workers are paid above the minimum rate anyway.

In any case, when most countries compare their economic variables with Scandinavia, they tend to come off worse. I don't believe unemployment in Denmark is lower than in the UK because of the minimum wage any more than I believe lower temperatures can explain Scandinavia's lower corruption levels.

Italy -with a population very similar to Britain- has never had a National Minimum Wage. Yet it's joblessness rates have consistently been higher than the UK since the NMW.

Take a look at this comparative table. At the end of 1997, Italy's rate stood at 12,2% vs 6,8% in the UK.

The rate went down in both countries throughout the Noughties. Italy reached its best moment in 2007-8 at 6.1%, its levels though still higher than the UK, where the joblessness rate remained consistently under 5 per cent between 2003 and 2006.

It's also worth noting that, in 2003, Italy adopted labour laws that are amongst the most "flexible" in Europe. While casualisation sky-rocketed and it became fantastically easy and cheap for employers to hire and fire, this did little to stem the massive downturn when it hit in 2008.

Again, Italy's unemployment went back up. As of March 2010, it stands at 8,6%. Though at their worst since the early Nineties, Britain's rates - currently 7,8% - are still lower than Italy's.

Britain has a mimimum wage, Italy doesn't. Would that be enough to explain the different performances if we were to follow Worstall's logical fallacy?

If that wasn't enough, we could look at other variables. Focusing on Britain alone, we can return to this table. Look at how high unemployment was in the pre-minimum wage days, through both the 1980s and the 1990s.

Or we can look at the United States, instead. Like Robert E. Prasch wrote in his In Defense of the Minimum Wage, "[B]etween 1981 and 1990, government policy allowed inflation to erode the value of the federally mandated minimum wage".

The neo-liberals in the Reagan and Bush Sr administration promised that a total freeze in the minimum wage would induce businesses to hire and provide experience to more unskilled workers. Compare the joblessness figures of 1979 (5,8%) with 1990 (5.6%). Like Prasch notes, "the structural reduction in unemployment simply failed to happen".

If anything (see this), US unemployment peaked in the 1980s and went down consistently throughout the 1990s, when the minimum wage was raised repeatedly for the first time since the 1970s.

Tracey Emin & Co: the "exile" that never was

Didn't Tracey Emin and other millionaires threaten to up sticks to dodge tax increases on the rich?

Time and again we hear threats from the rich, the greedy and the famous that, if taxation goes up by a penny or two, they will have to leave the country and bugger off elsewhere.

The most recent threat I remember was last November when Boris Johnson announced that Tracey Emin, Hugh Osmond and Michael Caine were already packing their bags. "The 50p tax rate that is beginning to drive these people away is a disaster for this country, and it is a double disaster that no one seems willing to talk about it", wrote the current London Mayor.

And only the most heartless envious leftist would not to see their point. Imagine the devastating psychological consequences of having to put off purchasing yet another mansion?

Either way, the simple question is: how long is it taking them to pack their bags? Have their travel agents been on strike for the last six months? What's stopping them from doing a Phil Collins, that is taking their quazillions to Lake Geneva?

It's the point made this morning by George Monbiot in the Guardian. "Sadly, most promises of self-imposed exile are empty", he wrote. "They seem to be intended, like Boris Johnson's warning last year that the City of London would be reduced to a ghost town by the new taxes, to dissuade the government from taking action".

Try and deny that.

Why is Corus' closure not on the front pages?

As a hammer blow is about to be dealt to the North-East, the government's lack of political will is there for everyone to see.

The media have decided they're not really interested in what could turn out to be the biggest casualty of the economic downturn in Britain so far.

After all, it's a complex and depressing story: the Corus steel plant in Teesside is about to shut down, with 1,600 skilled jobs about to be laid to waste along with a staggering further 8-10,000 job losses in the supply chain.

Much more has been said about Gordon Brown appearing on Piers Morgan's Life Stories or David Cameron's daughter breaking his i-Pod. A regional disaster with a guaranteed knock-on effect is about to take place and most people don't even know.

And yet causes for outrage are there aplenty. Teesside has been leading world steel manufacturing since 1917. Stretching from Redcar to Middlesbrough, it features the largest blast furnace in Europe. Privatised by the Thatcher government in 1988, the company was bought by Tata Steel for £6.7 bn in 2007, creating the world's fifth biggest steelmaker.

So how can it be that, with a general election looming and with every economist warning that extensive job losses pose the biggest threat to the economic recovery, we are allowing such a bedrock of our economy to go down - with devastating consequences for a whole region?

Why can't the government go beyond half-baked claims that they're "prepared to help the company and to work with any potential buyer" and simply take the company by the jaffas and ferry it across to better times ?

Some would tell you that the answer lies in a combination of the massive downturn and British steel being no longer competitive. But there are two flaws in this argument.

Firstly, the government has offered financial support to an ailing sector before. In October 2008, it made £500bn available to the banks in loans and guarantees, forking out financial sums that we didn't even know existed. Sure, it was inevitable, many say, as the entire economy was about to come crashing down along with the banks.

And yet an aid package to rescue Corus would be only a tiny fragment of the Great Bail-Out of 2008. More importantly, it would save the government billions in benefits, re-training schemes and the additional social costs of an entire area.

Also, it would help a sector that will always be viable. Steel will always be needed and British companies will have to buy steel anyway, all the time, except that they'll have to import it from abroad, dealing a further blow to an already embarrassing import/export balance - currently lagging at the bottom of the EU table. Steel manufacturing in the North East is also high quality. Its main competition has rarely stemmed from cheaper countries.

And in fact, Corus has received a number of offers, except that nothing has been finalised. According to Unite the Union, this is a "smokescreen" and a "disgraceful charade": "Serious offers have been made to Corus that would allow production to remain at the plant", said Terry Pye of Unite, "but the management has dismissed them all out of hand".

The suspicion that the sale is being thwarted "for competitive reasons" was also mentioned by the Financial Times: "Ray Mallon, Middlesbrough’s elected mayor, claimed a credible consortium interested in buying the plant had received no response from Corus to a request to 'look at the books' and to allow due diligence".

Nor are people convinced by claims that EU state-subsidy laws would rule out serious government intervention: last year, rules on both subsidy and state loan guarantees were extensively relaxed (at least until the end of 2010) and, according to the European Commission, by April 2009 ten countries had already taken advantage of the more lax system, the most popular example being Germany granting Opel €4.5bn in state guarantees.

It has been estimated that the German government has put aside €115bn to help any company in any industry, the only pre-requisite being that they are "victims" of the crisis and that they were performing well until the downturn kicked in.

It is purely a matter of how high different governments value the role played by manufacturing in society. In Britain, so it seems, it's far from being a priority. Alas, thousands of workers and their families are about to suffer the consequences.

We're all simpletons

Mass public sector redundancies will mean more "freelancers" available, the experts tell us.

In the last few days the British press enjoyed having a pop at Greece and the rest of Europe, quickly forgetting -obviously- the humongous impact of the downturn on the UK. Suddenly it's as though none of it ever happened.

But then look at yesterday's news reports announcing that, with the recession far from over, we're about to witness major redundancies in the public sector. Two weeks ago, Birmingham City Council announced around 1,300 job cuts.

Now, according to a survey carried out by the Chartered Institute of Personnel and Development and business advisers KPMG, many employers are in the process of sticking thousands of redundancy notices through the letter box.

Covering the news, yesterday's Today programme on BBC Radio 4 summoned up a certain expert (I can't remember his name) who reiterated that the redundancies are not going to be a bad thing and that every cloud has a silver lining etc.

Apparently, the pain of having public workers joining the dole queues will be cancelled out by a rise in the number of "freelancers", the good old word that, in the early days of the Blair government, was dangling from the gob of every politician even though it simply means "casual".

When the Radio Four chap pointed out that those "freelancers" won't have any job protection or pension scheme of any kind, the "expert" retorted "Oh but no. It's going to be a business to business relationship" without elaborating - of course. Yes, I know you're smelling something. And that must be the copious amounts of bullshit. Because even a 5-year-old would grasp that a desperate casual or agency worker would sign up for anything, forget pension schemes and guarantees.

This fake one-way optimism, however, is in line with the general assumption that the British public is a collection of simpletons who would swallow up anything.

Like, we've lost count of headlines announcing "the recovery", and it may as well be the case for a few shareholders. Yet we learnt today that the UK rate of inflation rose up to 3.5% (Consumer Prices Index -CPI) or 3.7% (Retail Prices Index -RPI) in January. And this is why pay freezes are being imposed left right and centre, with rises in 2010 expected to range between zero and 2.25 per cent. That is, only for fuckers like me or you, not for executives.

To a lot of people whose rent, utility bills, food shopping and transport are going to eat further into their wages this word - recovery - may end up sounding a little bit hollow.

0.1 reasons to cheer

Has recession really ended?

"I've been proven right", announced Gordon Brown yesterday following the publication of figures from the Office for National Statistics indicating a quarterly growth of 0,1% for the first time in two years.

Amidst the flurry of analysis that crowds the paper today, some of which betray hurried optimism, David Prosser in the Independent tells the most interesting story.

His angle is that there's more to the recession than sterile graphs. For example the fact that 1.31m people lost their job during the downturn and, out of those back in employment, "two-thirds [...] are in a new job are earning less than they were previously. The average loss of wages is 28 per cent".

Also, few are saying it out loud, but the foreseeable future is one lined with pay freezes across the spectrum against a background of price inflation and cuts in public spending.

Mass redundancies are still taking place. It may not have hit the front pages, but this morning steel firm Corus announced that its job cuts in the UK will affect 2,500 people. Last week Bosch broke the news that 900 jobs are going to be axed in Wales, followed by Cadbury's own admission that job cuts are "inevitable" amongst its 4,500 UK employees.

Not crowing over the recovery is one thing. Popping the corks of optimism on account of an infinitesimal number (while mass redundancies are still taking place) is another. And it's done in real bad taste.

****
Also on the subject and explained in a non-arsy accessible language, take a look at this article on thisismoney.co.uk

Bonus culture: in a parallel universe

Reporting from a world where bonuses are dished out to workers performing a public service.

Scene 1.
"The cynical, the envious and the tin foil hat wearers can whine as much as they want. Our duty is to recruit the very best", argues Hugh Jass, headmaster of a local comprehensive. "Investing in education is investing in the country's future, so if public money has to be spent, at least there's no better spending than this. If you want good teachers and a competitive edge, then large bonuses are a must", notes Mr Jass, spreading his arms. "After all", he adds, "better to reward good teachers than, say, investment bankers. Which contribute more to society?"

Scene 2.
"The NHS? It's a headhunter's dream at the moment. If your government curbed bonuses, the most talented British doctors and nurses would look for work here in the US", says Don Key, spokesperson for a large US private health care firm. "The NHS board has had legal advice that they would have to resign if the government blocked bonuses they regarded as essential to incentivise NHS staff", adds Mr Key. "There's a significant opportunity to raid that talent. I mean, if you Brits don't reward people who save your lives, where else are state funds going to go...banks???"

Scene 3.
"There is nothing worse than a sloppy bus service tarnishing the visitors' view of our city", points out Ben Dover, CEO of a bus company. "A punctual, competent, cutting edge public transport is what defines us. It is therefore in the interest of the public that we pay our staff decent bonuses. If you don't pay your best people, you will destroy your franchise. Those best drivers and staff can get jobs other places, they will leave", concludes Mr Dover.

Scene 4.
"The compensation always correlated with the results of the service", says Justin Case, Head of the Fire Service. "Our bonuses were therefore dispensed accordingly", he added. "Firefighters put their life at risk and we want to attract the best and most motivated staff", Mr Case remarks. "At the end of the day, it's not as if we're getting yearly bonuses of £1bn. Now, that would cause terrible damage to the economy".

Scene 5.
"Our soldiers are essentially the people who put their lives at risk for our country, often in very difficult conditions. Who in their right mind would continue to do that if bonuses are taken away?", are the forthright words of Dan D. Lyons, AG to the British forces. "I mean, if money isn't invested in selecting the best soldiers" continues General Lyons, "what else is the state going to spend it on, banks???"

Scene 6.
"Our workforce did what they were asked to last year and made profits. So when we consider how to treat them, the issue is how much worse can we treat them compared to any other transport service in the world", says Leigh King, union convenor at London Underground. "If you want security and efficiency to be paramount, you have to pay our staff accordingly. London would grind to a halt without us. Luckily we still live in a world where workers are rewarded for carrying out a public service, unlike bankers who are in for themselves. Let's just hope it stays this way", King concludes.

Cadbury? But that's the free-market, mate

Everyone's crying over Cadbury but the hypocrisy is vomit-inducing.

"A bitter taste in Bournville" and "Cadbury: Not such a sweet deal", writes the Guardian. "Why takeover bids rarely work", warns Jeremy Warner in the Telegraph. "Kraft takeover jobs bloodbath" and "High price for handing UK PLC to foreigners" are the headlines in the Daily Mail, while the Independent notes that "Bournville laments saddest day for 10 years".

Today's papers couldn't agree more. In essence, the widespread opinion across the spectrum is that another British institution is going, that the usual City "short-termists" are making a mint off the back of a local community, that the economic long-term interests of the country are being ignored and that Britain's surrendering to one too many foreign takeovers.

They're being very good at tutting at the "inevitability" of job losses, or at the CEO's £12m payout, or at the simple fact that the buyers Kraft are a company ridden with something like £22 billion of debt. Yet very few are grasping the fundamental reasons behind this mess.

For instance, the fact that the industrial policy of the past thirty years has been coherently and systematically biased towards the professional short-termism that turned London into the Mecca of City spivvery. And that's under the active complicity of both Tories and Labour.

Gordon Brown is crying that he'll do his best to secure jobs and the right-wing are shouting revulsion at the foreign companies who suck the blood out of British firms and then discard them like a piece of tissue after a couple of years. But this is the free market: a script we already saw with Rover and more recently with Bosch and Corus, "sorry very much, but it's all shareholders uber alles and tough for whoever's left to mop up the mess".

Bournville is one of the prettiest areas of Birmingham as well as one with a fairly solid community spirit. One can only imagine what would happen if the factory that's provided a living to thousands since the 19th century was to up sticks or be significantly scaled down.

And yet the picture's pretty clear. Like they point out at Unite, wherever it's gone in the past 10 years, "Kraft has sacked 60,000 workers to pay for other companies it has eaten up". The sourest irony of all is that the £7bn Kraft raised to table the bid were financed by RBS which is 84 per cent owned by the British government.

And until any of the major political parties will say it loud and clear that Britain can't carry on turning into a country exclusively centred around City gambles with the rest working in call centres and mobile phone shops, we will witness similar devastation time and time again.

So are all the opinionmeisters that today are crying crocodile tears for the "loss of a British institution" prepared to change their tack - given that they normally spot the dark shadows of "socialism" lurking behind the slightest governmental intervention (unless it's the banks bail-out)?

Are they prepared to accept that only a state that plays a bigger role in protecting manufacturing can halt the dependence on Bullshit Economy? Can they clock that protecting long-term stability, often the default policy in France, the US and Japan, doesn't mean that Stalin and Lenin are on their way back?

Sign the petition to Keep Cadbury Independent here.

Total bankers

Billy Bragg lays out his plans on bank bonuses.

Do you remember when the government bailed out the banks to the tune of £850bn? Didn't Gordon Brown and Alistair Darling insist that conditions be attached, that it would all be very strict and that, with the government as major shareholder, the banks would not be free to slip back into past excesses?

"[The deal] will carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer" - said Darling in 2008.

Back to today, and neither Labour nor the Tories are saying a word to the scandal that is quietly unravelling before our eyes.

RBS, where the governments owns a stake of 84%, have announced that they're about to dish up £1.5bn to £2bn in bonuses, with the board threatening to resign if not allowed to do so. Remember this is the same bank that in November 2009 announced plans to cut 3,700 jobs in addition to 16,000 already planned.

And yet they don't need to worry. There is no way anyone at Westminster is going to stop them.

Which is why the most sensible article I've read in response is the one penned yesterday by Billy Bragg in the Guardian.

"Until the chancellor of the exchequer acts to curb the bonus payments to investment bankers at RBS", the musician writes, "I am withholding my tax".

Bragg also highlights the discrepancy between both parties' professed commtment to cuts in public services versus their total lack of "will to do anything about excessive bonus culture".

If you agree with Bragg, then take a look at this campaign: NoBonus4RBS.

The Telegraph: woe betide the rich

A remarkable piece of ideology-soaked thinking in today's Torygraph.

When the top rate of income tax rises up to 50 per cent in April, a person earning £1m in Britain will have to pay £491,278 in tax.

An article by Damian Reece in today's Telegraph ('Tough times for the rich') compares the situation with the equivalent in Frankfurt (£486,808) and Paris (£461,128), London's two biggest financial competitors in Europe. "We really are going backwards", is the concluding remark.

It's interesting how Reece only draws comparisons with places such as Switzerland and Hong Kong, but not with Sweden, Norway, Finland and the Netherlands, where the top rate of income tax ranges between 52 and 55 per cent.

Or indeed Denmark, described by US business magazine Forbes as the country with "the best business climate in the world" as well as one with the lowest levels of income inequality. And, don't say too loud, the top rate of income tax in Denmark stands at 58 per cent.

However, the above doesn't fit the Telegraph's ideological propaganda.

Otherwise they would do good to mention what the Institute of Fiscal Studies reported a month ago: the fact that "earnings from employment [are] the main culprit in driving up inequality [in Britain]", and that unequal distribution started growing dramatically in the 1980s.

Or they would remind the reader of what The Economist - hardly a mouthpiece for socialism - remarked in a special report in 2007: that "income is distributed more unequally in Britain than in almost any big rich country except America" and that "fat pay packets have helped London house prices to triple over the past decade".

According to IDS (Income Data Service), in 1988, the average FTSE boss earned 17 times the average employee's pay. In 2008 the figure stood at 75.5 and, in 2009 - sod the "credit crunch" - 81 times the average pay of full-time workers.

With all of the above factors put together, it seems only reasonable for the government to take small steps towards redistribution. Quite simply, if top bosses don't act towards establishing more humane wage differentials, somebody else will have to.

It makes easy headlines to say that higher taxation "makes the threat of a gradual exodus from London real" - and we keep hearing it time and again - but god alone knows how many young talents would be ready to fill the shoes of the same egomaniac financial barons that brought the country's economy to its knees.

Also, like Robert Peston remarked last month, "taxing bankers rather than banks would not weaken the banks themselves, at a time when they need to accumulate capital".

Finally, it looks like it still hasn't dawned on many that an over-inflated financial sector carries enormous side effects which is precisely the reason why the UK was so badly affected by the crisis.

And by the way, while that thrives safe in the knowledge that bail-outs will come if the going gets tough, and manufacturing keeps going down the pan, how many mobile phone and fast food jobs are there to sustain the country?