Sorry, I just deleted a couple of genuine comments by mistake.

The Royal Bank of Scotland’s loans to Kraft Foods of the USA, to finance the purchase of the British chocolate company Cadbury,  raises all sorts of issues about national identity and the role of the nation state.  Kraft raised billions of pounds for its £11.5 billion acquisition of Cadbury, from the Royal Bank of Scotland and other supportive financial institutions. The money talked so loud that Cadbury’s shareholders voted for the deal. The Royal Bank of Scotland, let us remember, is 84% owned by the UK government.

Kraft lost no time in announcing job losses at Cadbury. The Somerdale factory at Keynsham, Bristol, is to close, resulting in 400 lost jobs. The work is transferring to Poland. True, Cadbury was itself planning to to stop production at Somerdale, but workers hoped that Kraft would — as business secretary Peter Mandelson had apparently pleaded — protect British jobs.

The migration of jobs to lower-cost locations is all too familiar now, an inevitable consequence of our global capitalism in which certain corporations have become more powerful than the elected governments of nation states, through methods that include the ‘revolving door’ for senior personnel, who move between business and government and back again.  The development of global busno-politico networks threatens to make the views of national populations almost irrelevant. How many British taxpayers would have supported Royal Bank of Scotland in its venture to aid Kraft take control of Cadbury, which was an iconic British brand, founded by a Quaker family for whom social justice was crucial? After all, the UK government owns Royal Bank of Scotland on behalf of the UK population, doesn’t it? For me, the fact that a bank controlled by the UK government can lend what is in effect our money to a company that is destroying our jobs poses a big question: who exactly is government working for?

It seems to me that we have lost control over our national life. If we are to feed ourselves adequately in future, to return to the theme of ‘Empty Plates Tomorrow’, that control needs to be regained. To a great extent, a government’s freedom to act in the interests of its own citizens has been circumscribed by the free-trade rules of the World Trade Organisation. Who, exactly, benefits from the World Trade Organisation? Your answers, please.

Bankers’ ‘talent’ is a burden for taxpayers

Taxpayers control Royal Bank of Scotland.
The liabilities heaped upon British taxpayers, just for the bank bailouts of 2008, are in £ billions, while the expenses of Members of Parliament, which have caused so much anger, are just in £ millions. £1 billion is one thousand times more than £1 million. So surely we should be a thousand time angrier over the financial collapse than over MPs’ expenses? Not a bit of it, maybe because we can grasp the concept of a million, but not of a billion. But grasp the concept we must because we will have to pay back the debts taken out in the name of ‘taxpayers’.
Meanwhile, the rampant greed in the City continues unabated. Big bonuses are back, allegedly to recruit and retain ‘talent’.
It’s precisely this ‘talent’ that got us into our present financial mess, by creating deals with no better purpose than to earn commission for their arrangers.
UK Financial Investments, which is supposed to look after taxpayers’ ‘investments’ in failed banks, approved a pay deal worth up to £9.6m for Stephen Hester, chief executive of Royal Bank of Scotland, if the bank’s share price reaches 70p.
This arrangement assumes that if the share price crosses the 70p threshold, it will be due entirely to Stephen Hester’s talent. This is not a valid assumption. Chance events might well propel the share price up, and then drive it down again. Why is it that bankers take the credit (and the money) when share prices rise, but demand to be rescued by taxpayers when the stock falls disastrously? Why is individual effort supposed to cause stock appreciation, but individual stupidity is rarely blamed for failure?
Answers please.

Uncivilisation

Could your neighbours be fiddling a few pounds each week from Social Security? Would you get on the phone and denounce them to the authorities? That’s what our government tells us to do, on the basis that it’s wrong to fiddle the taxpayer.

How strange that fiddling a few millions, or billions, of pounds doesn’t carry the same stigma. It all depends what you mean by ‘fiddle’, of course. To my mind, bankers who gambled recklessly with investors’ and shareholders’ cash, lost, and then expected taxpayers to rescue them, have been fiddling – misappropriating money that did not belong to them, metaphorically fiddling while Rome burned.

The last straw for me was the case of Fred Goodwin’s tax. Not the laugh-in-your-face £703,000-a-year pension, although it is justifiable only in an upside-down world of reverse ethics, where the rich are deemed deserving and the poor have only themselves to blame for their plight. This argument blames the poor for failing to get themselves into positions where they can take what they like from the nation’s treasuries. No, in the case of Fred Goodwin, ex-chief executive of the now almost completely nationalised Royal Bank of Scotland, it was the revelation that the bank paid his personal tax of £1.8 million on a lump sum he withdrew from his pension fund.

The bank paid. That means, investors and shareholders paid. My 90-year-old mother, a shareholder, and thousands like her, paid. What moral right did the oh-so-generous directors have to decide that ‘the bank’ would pay Fred Goodwin’s personal tax bill?

I do not know if their decision was legal or illegal according to the small print of the relevant regulations, but I do regard it as unethical. If it was ‘legal’ then there is a chasm between law and morality, and we are in deep trouble as a nation.

This begs the question of how, in a globalised economy, a single nation can apply ethical principals to business, when ethics are ignored throughout much of the rest of the world as companies scramble for profits, and directors enrich themselves, whatever the cost to the wider community?

Maybe we should take a hard look at questions of business ownership. Is it co-incidental that the Co-operative Group, perhaps the most ethically aware large business in the UK, is wholly owned by members? Will there be a new dawn for mutuality?

Short memories are, perhaps, the major barrier. Remember all the mutually owned building societies that members voted to float on the stock market, all through the 1990s? Abbey National was first, in July 1989. Subsequent demutualisations included Alliance & Leicester (April 1997), Halifax (June1997), Northern Rock (October 1997), and Bradford & Bingley (December 2000). They all converted into banks. The demutualised Halifax bought the Birmingham Midshires building society in April 1999. Lloyds TSB purchased the Cheltenham & Gloucester society (August 1995). Bank of Ireland bought Bristol & West (July 1997). The Woolwich demutualised in July 1997 and three years later, in October 2000, was bought by Barclays.

Banco Santander of Spain acquired Abbey in 2004, adding Alliance & Leicester and Bradford & Bingley Savings in 2008 (Bradford & Bingley Mortgages having been nationalised). Northern Rock was nationalised in February 2008. Halifax, which had merged with Bank of Scotland to form HBOS, was a hair’s breadth from collapse when the prime minister engineered a take-over by Lloyds TSB, with the outcome that by March 2009 the state owned about 77% of the newly minted but debt-ridden Lloyds Banking Group.

Demutualisation was a disaster. Building society members were persuaded for a few thousand pounds apiece to relinquish their ownership. It’s all ended in tears, and not one of the demutualised societies remains independent.

Short-term individual gains versus long-term benefits to society? In future can we rise above the Goodwin Factor? That means a universal code of ethics, for bankers as well as for social welfare claimants, and a commitment to mutual ownership strong enough to resist the temptation of a pocket of jingling coins.

Let’s face it, today many of our banks are social welfare claimants. There mustn’t be one rule for them and other, harsher rules for individual citizens who fall on hard times.

Hello to the long haul, or please cough up £71,700

Have you been trying to keep track of the government debt bubble, which has succeeded the dot.com bubble and the property bubble? The word ‘bubble’ sounds pretty, a vision of children blowing rainbow-coloured soap bubbles into a blue sky. We need another word, but the debt ‘bubble’ is so huge, so threatening, that few words suggest themselves as candidates. Poisonous cloud? Giant asteroid? Fatal avalanche?

At my last estimate, the UK’s national debt was accelerating towards £1.5 trillion. The announcements this last week that the government’s insurance scheme for banks’ dud assets, false assets, could be £500bn instead of the £200bn previously announced, takes the likely total to £1.8 trillion. The £200 billion, it quickly emerged, is nowhere near enough. The Royal Bank of Scotland has proposed ‘insuring’ up to £325 billion of ‘assets’ that are really liabilities, leaving only £175 billion of the £500 billion for Lloyds Banking Group, which harbours the stricken HBOS. Royal Bank of Scotland cannot afford to pay the ‘premium’ to take part in the insurance scheme and so will ‘sell’ to the state £6.5bn-worth of preference shares that, if converted in future to ordinary shares, would give the state some 85% of the bank. Meanwhile, government – taxpayers – are effectively lending Royal Bank of Scotland enough money to take part in the insurance scheme that government – taxpayers – are funding. Why bother with all this pretence of independence? Royal Bank of Scotland should be fully nationalised, restructured, downsized and simplified.

Back to the £1.8 trillion. How long would it take us taxpayers to repay this staggering sum? The median income tax paid in 2006-07, the latest year for which Her Majesty’s Revenue and Customs have this data, was £2,330. If I paid £2,330 a year to pay off the National Debt, how long would it take? The answer is 772.5 million years, or more exactly, 772,532,188.8 years. And this is if every penny went to repay the National Debt, meaning that there would be nothing at all to keep public services going.

Let’s look at the number of households in the UK, about 25.11 million. If they all paid £2,330 a year to repay the National Debt, how long are we talking about? The answer is 30.77 years. The prospects for every household in the UK stumping up £2,330 a year in National Debt repayments are exceedingly dim. Of course some households could afford to pay a lot more than this, and income tax is just one stream of government revenue, but these sums are still grim.

The £1.8 trillion is a near quadrupling of the £513 billion National Debt when Gordon Brown became prime minister in June 2007,  a burden that cannot be borne without either slashing public services, increasing taxation to penal levels, or increasing the money supply thus causing inflation that, in theory, would make the real value of the debt diminish.

All three options carry toxic effects:
•    Taking the axe to public services would make unemployment balloon, imposing new costs in welfare benefits. Cutting welfare benefits in response would lead to social breakdown.
•    The option of piling on more taxes would damage consumer spending, in turn leading to greater unemployment, with consequent pressure on the welfare budget and on social stability.
•    Increasing the money supply is notoriously hard to control and could lead to a terminal collapse of confidence in sterling, as overseas lenders to the UK government worry that their loans will be repaid in worthless paper. At home, devaluation of the £ resulting from ‘quantitative easing’ or boosting the money supply would sharply increase the cost of the imports on which we now rely.

The alarming position in which we find ourselves calls for acceptance of lower material prosperity, indefinitely. Economic growth is not the way out. There is not enough oil or gas to power it, and in any case the looming dangers of climate change require us to cut back our burning of fossil fuels. In the UK, we have to bring public spending down into balance with income. Public spending in 2007-08 was £501.626 billion. The government’s total receipts were £472.005 billion, so spending was 6.28% more than income. We also have to increase taxation for the specific purpose of repaying the National Debt. The debt stands at nearly £71,700 per household. Repaying this at £250 per household per year would take almost 287 years, assuming for the sake of the calculation that the number of households stayed the same. Even at £500 per household per year, we are talking about 143 years.

The chancellor, Alistair Darling, has already announced some tax rises from April 2011: a 45% band for tax on incomes above £150,000 a year, an extra 0.5 of a percentage point on national insurance for earnings between £20,000 and £44,000, and 1.5 percentage points more on earnings above £44,000. These increases won’t be enough: we are in for a long haul of high taxes.

There’s no point piling all the blame on reckless and avaricious bankers. Shareholders, including life insurance and pension funds, demanded ever-increasing profits and so can be accused of refusing to learn the lessons of history, one of them being that no boom continues indefinitely. Don’t let’s forget the politicians: they started the destructive tsunami of deregulation back in the 1980s. Politicians, shareholders and bankers have been complicit in an attempt to destroy the economy of the United Kingdom, an attempt that is perilously close to success.