Category Archives: Economic

Arts, Britain, Economic, Government, Politics, Society

Transformational leadership is needed for a re-moralising of politics and society…

A NEED FOR THE MORALS OF POLITICS TO BE RE-EXAMINED

Intro: The desire for transformational politics is high given the moral challenges of today

We often hear people say that politicians are ‘all the same’, which infer a general objection to our technocratic, managerial political culture. During 2013, figures from outside the Westminster bubble unearthed a public yearning for leaders with the moral and ethical clarity to face many of our present woes.

The greatest need for moral leadership is at its peak during times of economic scarcity. The financial crisis of 2008 and the years of austerity that have followed have returned to the fore the ethical questions that were too often set aside and ignored during the pre-crash era. Political and economic questions such as, ‘How should limited resources be allocated?’, ‘What constitutes the good society?’, ‘What are the values that should underpin our economy?’, or, ‘Can individualism and the common good be reconciled?’ The public disillusionment with our political leaders and what their parties stand for can partly be explained by their direct failure to address these issues more convincingly. When politics is reduced to a game, and when party strategists continually seek to outmanoeuvre each other for short-term tactical advantage, it is unsurprising that the public turns away. The frequent cliché that they are ‘all the same’ is not an attack (as is often thought) on a perceived lack of policy divergence, but on the managerial and technocratic culture that political parties embody.

Behind such public apathy and disillusionment, there is a craving for answers to the moral challenges of our time and for national leaders who can at least attempt to provide them. The recent death of one of the world’s most respected statesman, Nelson Mandela, has made this even more so.

Noticeably, however, one of the trends of 2013 was the emergence of leaders outside the political circle who have shown considerable moral guidance. Pope Francis, for example, has revived his Church’s spiritual fortunes by reorienting it away from the conservative obsessions of same-sex marriage, abortion and contraception and towards issues of economic equality and social justice. Pope Francis has made a number of emblematic gestures since becoming Pontiff last March, including humble acts such as carrying his own suitcase, living in a modest hostel as opposed to the rich grandeur of the Vatican palace, the embracing of a disfigured man, and has communicated his vision of a church ‘of the poor, for the poor’. The moral denunciation by Francis of ‘unbridled capitalism’ has resonated all the more as a result of his church’s changing stance and position. After decades of steep decline, church attendance among Roman Catholics has risen significantly across the world, including in Britain too.

The Archbishop of Canterbury, Justin Welby, who was enthroned two days after the inauguration of Pope Francis, has, over the same period, reaffirmed the Church of England’s status as ‘a defender of the most vulnerable.’ He has openly condemned the coalition government’s welfare cap on benefits and for making children and families pay the price for high inflation, rather than the government. Mr Welby has denounced the usurious lending of payday loan companies and has been equally critical of banks in their desire to continually seek what is ‘legal’ and never what is ‘right’. Like Pope Francis, the Archbishop of Canterbury has demonstrated his Church’s values through deeds as well as words.

One need not share their faith to respect the moral clarity that both religious leaders have brought to issues of economic justice. There have been others, too, such as the comedian Russell Brand, who provoked a remarkably successful debate with his insistence that the solution to deepening inequality and rampant consumerism has to be primarily ‘spiritual’ and his declaration that profit is ‘the most profane word we have’, commanded public attention for almost a fortnight in a way few politicians can.

Whilst not standing for public election, neither the Pope nor the Archbishop of Canterbury faces the same kind of struggles to reconcile competing interests as many of our politicians must contend with. The political class can learn, though, from how they have engaged with fundamental questions and how previously dormant debates have been actively revived.

Some of our more thoughtful MPs from across the political spectrum have recognised the need for a different kind of politics. Jon Cruddas, Labour’s policy review co-ordinator, for example, called for a ‘reimagined socialism’ in his George Lansbury Memorial Lecture in November. Mr Cruddas called for a type of socialism that is ‘romantic, not scientific; humane and warm; passionate yet humble’ and one that ‘pushes back against party orthodoxy, careerism and transactional politics’.

The re-moralisation of our politics and society remains a deep desire five years after the financial crash. In leading that transformation, we still await the politician who can inspire and provide the transformational leadership many people are now demanding.

 

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Britain, Business, Economic, Finance, Government, Society

The Revenue must call multinationals to account…

TAX AVOIDANCE

The relationship between the Government’ Revenue Service and how big corporations are being advised on how best to avoid paying tax is often uncomfortably close. Suspicions are such, that no sooner have civil servants finished writing a new addition to the corporate tax laws, is then quickly followed by a recruitment drive by top accountancy firms to provide ideas on how to get round it. Tax avoidance measures are costing the Exchequer billions in unpaid taxes.

The belief that HM Revenue and Customs (HMRC) has too cosy a relationship with the big multinationals has gained new credence when, just last week, a Commons select committee suggested in its report that the tax authority seems to ‘lose its nerve’ when it comes to pursuing the biggest names in business.

The chairman of the House of Commons public accounts committee, Margaret Hodge MP, said:

…In pursuing unpaid tax, HMRC has not clearly demonstrated that it is on the side of the majority of taxpayers who pay their taxes in full.

Noticeably, one of the key findings of the committee’s report was that last year the department collected less tax in real terms than it managed to collect in 2011-12, despite its stated aim of cracking down on tax avoidance. For the average man and woman in the street, who are desperately struggling through the age of austerity, this is an extraordinary state of affairs. With public services being cut at a faster rate than ever before, most people will surely find it astonishing that the corporate world is getting an easier ride than before.

There is, however, an indifferent logic behind the tendency of HMRC to strike deals that seem advantageous to the big firms. Multinational corporations hire very expensive lawyers, who invariably find a way round most of the complex tax rules. At some point, the HMRC calculation seems to be that it would rather cut its losses and do a deal than prolong the agony for an uncertain gain at some indeterminate point in the future.

That is the logic, but it is morally indefensible – especially when the tax authorities show no such leniency when it comes to wringing every last penny from the minnows of British business. Little compunction from HMRC often forces small firms to the wall, even if they are struggling to pay their VAT on time.  These small and medium sized firms (SMEs) put up less of a fight, which is why they are pursued so ruthlessly.

Taxation has to be seen to be fair. For that to be the case, the UK system needs to meet two standards. First, it is imperative we introduce new laws that massively reduce the scope for avoidance. There is a strong argument that the tax code is now too complex, and that this complexity has produced a multiplicity of loopholes that are being exploited. And secondly, HMRC needs to have the resources (and the will) to pursue multinationals as relentlessly as it pursues the country’s smaller firms.

Fairness demands that multinationals know their obligations and are obliged in meeting them.

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Britain, Economic, Finance, Government, Politics, Society

An alternative to the Chancellor’s plan to permanently shrink the state…

 ECONOMIC MANAGEMENT OF THE PUBLIC FINANCES

George Osborne’s plans delivered within his Autumn Statement last week lays bare the neoconservative strategy. Hidden amid the plethora of all the other numbers, the Treasury has announced a further year of austerity spending for 2018/19 – the ninth in a row. This Autumn Statement, however, was different, because it was the first where the Chancellor has called for a permanent, structural shrinking of the state.

Since 2009, the Treasury has sought to return the public finances to roughly where they were before the crash. Now, though, out of political choice, Mr Osborne is proposing that government spending should fall, as a share of national income, to far below its pre-crisis level.

In 2007, public expenditure equated to 40.5 per cent of national income. It increased rapidly to 47 per cent by 2009, mainly due to the economy shrinking, rather than rising spending. Since then, the Treasury has been clawing its way back towards Labour’s level of spending, and in March Mr Osborne’s plan was to reach the pre-crisis benchmark by 2017. Within this year’s Autumn Statement everything has changed – without any announcement, the Chancellor pencilled in a cut of 38 per cent of GDP for 2018.

Historically, when public spending slipped this low it was because the economy was extremely buoyant. In the late 1990s, for instance, Tony Blair’s government were caught off guard, with inherited Conservative spending plans and a booming economy. This time is different; despite a recovery that is helping to move the country out of recession the economic projections are far from impressive, and the strain of shrinking the state is to be borne solely by spending restraint.

Examining the detail will reveal that, in 2016 and 2017, the plan is ‘more of the same’ – total real spending is to fall at a similar pace to that from 2011 to 2015. Then, on top of seven years of cuts, spending in 2018 is to be frozen, even though economic growth is predicted to be 2.7 per cent.

If implemented, there is only one conclusion that may be drawn – the end of public services as we know them. By 2018 spending on services would be almost 20 per cent lower, and that’s on a comparison with today. And if the government remains adamant in protecting areas like the NHS, international development and schools, other government departments would face cuts of up to 40 per cent. In reality, this will mean many services spending less than half what they did a decade previously. The only option in limiting this damage would be more severe cuts to welfare. It is difficult not seeing pensioner benefits, which form the bulk of welfare spending, not being affected in some shape or form.

A shrinking state. Graphical variations between the Autumn Statement, the March Budget and proposals put forward by the Fabian Society post-2015.

A shrinking state. Graphical variations between the Autumn Statement, the March Budget and proposals put forward by the Fabian Society post-2015.

The Treasury plan is wilfully counterproductive in terms of the government’s proposals for public investment. Following the Autumn Statement, the Office for Budget Responsibility (OBR) revised down its expectations for business investment as a driver of recovery, but this suggests by implication that public investment is needed more than ever. Yet, for two years after the election it is to be flat in real terms. This can only amount to a further decline (as a share of GDP), and will become a further restraint on growth.

In October, the Fabian Society Commission proposed another way with its Future Spending Choices. It argued for a significant boost to public investment and for overall spending to rise after 2015 by one per cent a year for two years. This, the Commission says, would take spending as a share of national income to the pre-crash benchmark of around 41 per cent of GDP. After that, expenditure should return to trend and match annual rises in GDP.

The Fabian Society’s proposed spending path is compatible with sustainable public finances but diverges hugely from the government’s spending plans. By 2018, there would be almost £40bn more to spend, enough to turn the Chancellor’s massive cuts to public services into a freeze. This still assumes tough spending decisions to be made, but public service meltdown could be avoided. Mr Osborne’s plans should thus not be interpreted as inevitable or even necessary.

Labour should take the opportunity in delivering post-2015 plans. They should define an alternative, so that the Conservatives do not set the terms of the fiscal debate as the general election draws near.

George Osborne’s ideological cuts are just one route to sound public finances, but many others are also available. Many will say that we do not need to deliberately shrink the size of the state to such levels that the government now seeks. Overshooting pre-crisis spending should not be the objective of any future Labour government.

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