Monday, November 24, 2008

It's the economy...

It is impossible not to smile at headlines announcing a higher marginal tax rate for the rich – even if it won’t be introduced until after the next General Election and then only if we can do 1992 in reverse. Taken together with proposals to reduce the regressive Value Added Tax (VAT), whatever the economic consequences, the political feel is of a Labour Government treading tentatively leftwards.

Given the scale of the economic crisis unfolding around us, I only hope that the leaks from the Government deliberately understate the changes which the Chancellor will announce this afternoon – he needs to shock the Commons in the same way Geoffrey Howe did when he put VAT up to 15% all those years ago.

A massive fiscal stimulus (through tax cuts and increased spending) together with further reductions in interest rates clearly have the potential – if coordinated globally – to moderate the severity of the coming recession. This is worth supporting for itself, because each job that is not lost is one household saved from poverty – and because the slower and gentler the increase in unemployment and the swifter and faster the subsequent reduction the less the damage that is done to our bargaining position as trade unionists.

However, as trade unionists we need our leaders to resist the urge to act as cheerleaders for Labour Ministers. We need to demand, in response to the detail of the Government’s economic announcements, that the contours of the fiscal stimulus in particular support our members’ interests. We also need to raise our eyes beyond tomorrow’s – and next year’s - unemployment figures and develop and articulate policy demands to reshape our economy in the interests of working people. UNISON’s NEC began to rise to this challenge in the statement adopted in October – we need to build on and develop this work now.

The Government’s economic announcements should today respond to some extent to UNISON’s demand that “spending on public services must be increased to meet greater social need and counteract the downturn in the private sector. This will necessitate an increase in public debt, currently low by international and historic standards, and a rebalancing of our system of taxation so that corporations and wealthy individuals are required to pay their fair share.” This is welcome, but we now need to elaborate our demands.

In the immediate term, we need to point out that low paid workers have a high “marginal propensity to consume” and that a relaxation of the Government’s unjust public sector pay policy, particularly if it coincided with really significant cuts in VAT and continuing low interest rates would have a very positive reflationary impact.

There is no reason – apart from dogma and inertia – why, for example, the Local Government Employers, with Government support, should not now approach the arbitrators seeking to resolve the 2008 pay round in England, Wales and Northern Ireland and tell them that the employers want to give an immediate boost to the earnings of the lowest paid through, for example, an additional flat rate increase backdated to 1 April. The Government could fund this directly through the revenue account and meet the cost by borrowing, or it could allow local authorities to capitalise the expenditure. Similarly, the Government could tell the NHS employers that they should forget about arguing that they don’t have a recruitment problem and should agree that the pay review body considers an increase in the second and third years of the current pay deal – the terms of reference for pay review bodies may need to be addressed to enable them to take account of the macroeconomic impact of their recommendations.

However, even more important than what happens in the short term is that the trade union movement should express some opinions about the long term which reflect the interests of our members.

The UNISON NEC statement in October was clear that we need fundamental change in the finance sector stating that “intervention to secure the banking system should not merely “bail-out” those who have caused this crisis by socialising the losses and taking on unprofitable parts of the sector. Instead any public financial support for the sector should entitle the public to share in the benefits of any future recovery, and must be accompanied by an extension of regulatory controls to ensure that the excesses of the recent
period are not repeated or rewarded.”

I don’t think that now is the time for timidity in developing this policy further. Just as UNISON supports public ownership of our utilities or our transport infrastructure, so we should respond to the credit crisis and the consequent recession by demanding democratic public control of the banks, as a central element of our financial and economic infrastructure – and I agree with fellow UNISON member John McDonnell, MP that public control can best be ensured by public ownership. Nationalisation of the major banks is not now an unrealistic demand.

One counter argument to this demand, as expressed at last week’s UNISON Greater London Regional Committee by the Regional Finance Convenor is that “we don’t want civil servants running banks.” Leaving to one side the questions of whether disdain for public servants is welcome in officials of a public service union – and of whether bankers have shown themselves particularly adept at running banks in the recent past! – this is simply an argument against public ownership per se. We need a more mature debate about the contours of public and private ownership, and it is fairly obvious that recent events at least pose the question of whether exclusively private sector ownership and control of the banks is in the interests of our members.

Another counter-argument, echoing the words of the Tories before 1945, is that we should not want to nationalise “our savings and our pensions.” Now of course, nationalising an institution does not nationalise the deposits it holds (or no one would have any money left in Northern Rock). It may be a shame that for all the work that is done on capital stewardship, pension funds have yet to redirect the economy for the benefit of those on whose behalf they invest. However, such is the nature of a capitalist economy driven by profit. If we want a banking industry that works for the public good we need to place it under democratic public control.

We should not be afraid to argue for democracy in relation to our economy just as we argue for democracy in other areas of public life. A similar argument can be applied to further develop UNISON’s current demand that “interest rates must be cut as a matter of urgency, and the monetary policy pursued by the Bank of England needs to move on from an exclusive focus upon controlling inflation to one that also seeks to ensure high levels of investment and employment.”

What follows from this is that monetary policy should be restored to democratic control and the technocratic experiment in the “independence” of central banks should come to an end. This was only ever “independence” from popular pressure and democracy, never “independence” from the perceived interests of those with wealth and power.

Underpinning the belief in private ownership of the major banks and financial institutions, and in the “independence” of central banks, is a belief that ordinary people are not to be trusted to run our own economy. We are told that we need experts to do this for us.

On the contrary, now – when the “experts” who have been trying to sell us privatisation for a generation stand exposed as failures – it is up to ordinary trade unionists to have the audacity and the ambition to spell out an alternative.

This is why I hope that UNISON’s Greater London Regional Council will – in December - have the opportunity to debate the motion from the Lambeth local government branch which sets out to build upon and develop the policy agreed by the UNISON NEC in October.

This depends upon whether or not a quorum of delegates attend the meeting – so if you are reading this and are a UNISON member in Greater London, it is in your hands whether we have this debate, or leave it up to the “experts”…

1 comment:

Anonymous said...

Particularly enjoyed the Chancellor refusing to rule out the full nationalisation of the banking system if they refuse to lend.

Really unusual for government policy to be to the left of Greater London UNISON!!!