Tuesday, 19 May 2015

The effects of a capitalist state

So what are the effects of Britain surrendering its position as a democratic state in favour of a capitalist one?


In 2010 chancellor George Osborne and PM David Cameron told us “there is no alternative to austerity” but this was simply not true. The economy was already starting to show some signs of recovery when the conservative lead government took office in May 2010. But as they launched their program of austerity, the economy stagnated for the next three years. In fact it had such a negative effect, George Osborne had to halt the remainder of their program for the rest of the parliament. The majority of the austerity measures have been focused on cuts to central government spending, particularly to Central Government Departmental Expenditure Limits (DEL).  These have been characterised by unprecedented cuts to public sector jobs. In mid 2013 the public sector workforce stood at 5.7million or 20% of the workforce. This represented the lowest share of employment for four decades. Forecasts from the Office for Budget Responsibility by 2019/20 there will be a further 1.1million cuts to public sector jobs based on 2010/11 figures and this will further reduce the share of public sector workers to 14.8% of the national workforce.

Another area our government chose to focus on under the banner of austerity measures is public sector assets. Among those have been fourth generation (4g) Spectrum raising £2.34billion for the public purse, £1.2billion less than predicted by George Osborne, Royal Mail raising £1.98billion, but estimated to have been undervalued by up to £600,000, Eurostar raising £300million, with the British share in Urenco predicted to be next to face sell off for an estimated £3billion.


Banks are very much at the root cause of the financial crisis in 2008, which has given rise to new austerity policies, through over exposing themselves to bad debt particularly in the US housing market. According to figures from the National Audit Office the cost to the public purse of bailing out UK banks as at 31st March 2014 was £1.16 trillion. Between 2009-12 they also benefited from a £375billion program of quantative easing that was supposed to enable them to lend more to small & medium sized businesses, but the banks just kept the money.

As a result of the bailout we the British taxpayer acquired an 80% shareholding in RBS and our original 43% shareholding in Lloyds Group has been reduced to 24%. Yet despite these facts, not a single one of us has any say in how the banks are run, are allowed to attend shareholder meetings, nor cast a single vote at the AGM. While we have been lumbered with almost £1.5 trillion of debt, the banks have been allowed to very much continue with business as usual, which means over exposure to lending, shadow banking, the illegal rigging of Libor rates and international currency exchange rates and huge bankers bonuses. In 2014 bankers bonuses rose by 5.5% while the average workers pay rose by just 2.6%. The increase saw UK bankers receive £40.5 billion in total. Last November Chancellor George Osborne withdrew a legal challenge in the European courts against EU legislation proposing a cap on bankers bonuses to 100% of normal salary, or 200% with board approval after admitting it was unlikely to succeed. The legal challenge is estimated to have cost the British taxpayer £46,000.

Food banks

Britain has the sixth largest economy in the world, yet as a direct result of the coalition governments austerity measures and attacks on benefit claimants 1,084,604 people including almost 400,000 children were reduced to asking for free hand outs from food banks last year, simply because they did not have enough money to feed themselves and their families, according to the charity Trussell Trust. In the same period an estimated 2,716 bankers earned more than £1million. The figure represents a 2,651% increase on the number of people using food banks in 2009/10, which was 40,898. Among the reasons given for having to use food banks were benefit delays making up 29% of people, low income 22%, benefit changes 14% and homelessness almost 5%.

Fossil fuels

As easier to extract energy sources are beginning to run out because of our unsustainable levels of consumption, we are resorting to ever more extreme methods of energy extraction. Over the last one hundred years the exploitation of fossil fuels has moved from tunnel mining for coal and drilling shallow oil wells, to tearing apart entire mountains and drilling a mile or more deep into the ocean. These have consequences including increasing pollution, more dangerous working conditions, higher greenhouse gas emissions, more land being used and less resources available to other sectors of society.

Tar sands, mountain top removal, deep water drilling, biofuels and fracking are all symptoms of our obsession to suck the last and most difficult to reach drops of energy out of our planet. Despite widespread opposition and concerns about contributions to dangerous climate change and it’s links to water contamination in US & Australia, the coalition gave the go ahead for fracking to be carried out in Britain. The government also made changes to trespassing laws that will allow the fracking companies to drill under our houses without our consent. MP Caroline Lucas said “This ignores the public interest in pursuit of the vested interests of a few.”

Household income

Since 2010 all public sector workers have been suffering a pay freeze while the cost of living continues to rise. According to a report released by HM Treasury the top 10% of earners in Britain have salaries equal to those of the bottom 40% combined. For a couple with two children the average income of the top 10% is £151,400 compared to £19,700 in the lowest 10%. At £142,500 even the Prime Minister’s salary is below the average for the top 10% of couples with two children.

Recent research by Oxfam found that the five richest families in Britain are worth more than the poorest 20%. The survey found that for the first time more working families are living in poverty than non-working ones, with the top 0.1% of earners taking the lions share of the proceeds of economic growth. Pay compare, a not for profit organisation that invites private corporations and public bodies to publish the difference between their highest and lowest paid workers. In 2013-14 of companies that agreed to publish their data COOP group had the highest difference with their highest paid worker being paid 106 times that of the lowest paid.


The average UK house price is £281,753, representing a 1% increase in average price since June 2014. Estate agency Rightmove said the typical asking price of a first time home has increased by 7.6% over the same period to £169,414 on average. With people age 55 and over now having more freedom to access their pension pots thanks to new rules brought in from last month, Rightmove predict there will be an increased demand in buy to let properties that will drive house prices up even further. In the South East of England the increase was 8.2% since June 2014 to an average asking price of £369,600. With many mortgage providers demanding a 30% deposit many British people are now being excluded from ever owning their own home.

In the rental market rents average rental values for new tenancies have increased by 10.2% between the first quarters of 2014 and 2015 to £753 per month. Average tenant incomes increased 1.9% in the same period. In London the average rental values for new tenancies saw an increase of 8.4% to £1,443 per month. Information comes from the HomeLet Rental Index.


In it’s first report in February 2011 the National Preventative Mechanism, a body set up under the optional protocol to the UN convention against torture, highlighted serious problem areas in the British Justice system including mental health, resources, vulnerable groups such as women, children, people with disabilities, those who misuse alcohol and/or drugs, the size of the prison population and the right to dignity. In the name of austerity ongoing state retrenchment has involved significant cuts to legal aid, the HMCTS budget and publicly subsidised advice sector. The result is a widening justice gap, with legal advice and representation priced out of reach for many people. As a result, an ever-increasing number of people are being forced to navigate the system alone and are placed at an automatic disadvantage when faced with our complex laws, arcane procedures and the adversarial approach that is used in courts and some tribunals.


Our national treasure and the only political issue in which the vast majority of the British people agreed. We want our NHS to remain a publicly funded and publicly owned asset. But with PFI debts of £300billion that will take seventy years to pay back and were incurred under Tony Blair & Gordon Brown’s New Labour government. In 2009 David Cameron declared that if he were elected as prime minister in the 2010 general election, there would be no more top down reorganisation of the NHS. But in 2012 then secretary of state for health Andrew Lansley produced the Health & Social Care Act, said to have been a reorganisation so big it could be seen from space. The Act removed the legal obligation on the secretary of state for health to provide a NHS and its purpose is to increase the use of providers from the private sector in providing NHS services.

While NHS budgets were shielded from budget cuts under the coalition government, continued rises in the population, the effects of inflation, increased usage of A&E departments in part due to some having being closed down and a growing elderly population have all added pressure on already overstretched NHS budgets. However the same protection from cuts has not been given to mental health trusts. Since 2010 their budgets have been cut by 8.25% on average, resulting in the loss of more than 1,600 beds. Paul Farmer, chief executive of mental health charity Mind said “The treatment gap for mental health is huge, 75% of people with mental health problems get no help at all under the NHS.  In my local trust the number of days a patient waited for a hospital bed last year ranged from seven to twenty one days, with the average wait being nine days. Patients are being looked after by the community mental health teams while waiting for a bed, but with the cut backs they received in 2012, the team are unable to cope with demand. Seven people have committed suicide while waiting for a hospital bed in my area since 2010.


One in three of the UK population live below our official poverty line, meaning that they experience life as a daily struggle. Therefore in the nation with the sixth richest economy in the world, 20 million of its citizens including 6 million children, do not have enough to live on and most do not have the power to speak out about what this feels like and why it is wrong. Almost 60% of those living in poverty are home-owners. The largest ever survey of poverty in Britain by economist Stewart Lansley and academic Joanne Mack make some devastating revelations about social inequality including 3.5 million adults go hungry so that they can feed their children. One in five children live in a house that is cold and damp and one in ten do not have warm clothes. In an interview Mr Lansley who has campaigned against poverty in Britain throughout his life said “We are on the wrong road. We need a change in political direction, we need transformative policies of the type we say in post war Britain.” The authors claim that levels of poverty seen today can be traced back to the Thatcher government’s decision to cut the top rate of income tax from 83% to 40%.

Tax gap

The tax gap is the difference between how much tax should be paid and how much tax is actually paid. Or more simply the amount of tax that goes unpaid every year. According to official figures from HMRC the UK tax gap in 2013/14 was £34.4billion. However research from Richard Murphy of Tax Research UK suggests the size of the tax gap is actually £119.4billion per year. In his report Richard identifies annual losses to HM Treasury of £85billion due to illegal tax evasion activities, a further £19billion loss due to legal tax avoidance and a further loss of £18billion per year due to tax that is due simply not being paid. To try and put this into context the amount of lost revenue would have been enough to cover the £87billion George Osborne borrowed in the last financial year with £32billion left over.

Tax havens

Tax havens are secretive jurisdictions where British citizens can easily hide money and earnings from the taxman. The news in February this year announced that HSBC’s Swiss arm had helped people including British citizens evade £millions in tax. According to HMRC there were almost 7,000 British citizens with secret bank accounts with HSBC, but the majority of those had done nothing illegal and 1,100 who had evaded paying the £135million they were found to have owed. Despite tax evasion being a criminal offence in Britain, only 1 person has ever been prosecuted in a court of law.

The Tax Justice Network compiles the Financial Secrecy Index and rates the worlds 82 largest tax havens based on their financial secrecy score and the jurisdictions share of the global market for offshore financial services. Based on this data Switzerland is the world’s biggest tax haven. Based on the global scale weight USA is the largest with a 22.6% share of the global market, followed by Britain with an 18.5% share. Of the eighty two states listed, ten are British overseas territories and a further nine are British commonwealth territories, whose court of appeal is the Judicial Committee of the Privy Council in London.

Transport costs

British rail was privatised in 1993 under the promise of a better, cheaper railway that would require less public subsidy. Private firms would bring capital and innovation to the railways we were told, but neither of these promises have materialised. According to the rebuilding Rail report the cost of maintaining the railways more than doubled in real terms since privatisation, from £2.4billion during the five-year period 1990-95 to £5.4billion per year between 2005-10. Britain now has the most expensive rail fares in Europe that are 30% higher than the European average.
Between 1997 and 2012 on the West coast mainline, Virgin trains paid out £500million in dividends, having received a subsidy from the government of £2.5billion. As the train operating companies are private firms, they have a legal obligation to maximise their profits for their shareholders, rather than putting passengers first. The five largest private train companies received almost £3billion in taxpayer support between 2007 – 2011, allowing them to make operating profits of £504million, 90% of which was paid to shareholders as dividends.

The private train operator National Express walked out of their contract to operate the East coast mainline in 2009 because they could not make it profitable. Directly operated Railways, a public company which was set up to run the line since 2009 has made it highly successful in working better for passengers and for taxpayers. It also requires less public subsidy than all of the privately run lines with just 1% of the lines income, compared to an average of 32% on other lines. Now that it is running successfully and is profitable, the coalition government have awarded a franchise to a joint bid from Stagecoach and Virgin trains.

Welfare benefits

The British welfare system has been radically reformed under the previous coalition government and in the name of austerity. Anyone now claiming Job seekers allowance had to sign on fortnightly, but now must attend weekly meetings with an advisor at the jobcentre. New strict sanctions have also been introduced that can mean a claimants benefit is stopped for four weeks as punishment for a range of misdemeanours including turning up late for an appointment, or not having completed enough job applications. The claimant is expected to live, and feed themselves as well as any children they have without any money for four weeks.

New stricter assessments were introduced for those claiming employment and support allowance because they are not well enough to work. Atos, the private company who were contracted to carry out these assessments were finding the vast majority of people fit for work despite some having very serious illnesses including cancer, mental health and others. Benefit fraud is estimated to cost the British taxpayer £1.2billion a year and there were more than 8,600 people prosecuted in 2013. In comparison tax evasion costs British taxpayers an estimated £85billion per year, but here were only 617 prosecutions for tax evasion in 2013.

Zero hours contracts

We don’t know to what extent benefits sanctions have fed the zero hours contract industry. It is feasible that claimants having been sanctioned by the jobcentre and having no money, in desperation take whatever work they can find which may be a zero hours contract. As the name suggests anyone working under such a contract is not guaranteed a fix number of hours, so it is impossible to know from one week to the next when you will be working. Of course when someone on a zero hours contract is not working they are not being paid. Between October and December 2014 there were 765,000 people employed on zero hours contracts in England & Wales.


The above is not an exhaustive list of all the areas of our society affected by Britain becoming a capitalist state, nor is it meant to be. They are a demonstrative example of the way capitalism has infected almost every area of our lives and none of it has been change for the better. We as citizens are being punished for the reckless gambling and mistakes of the financial services industry, while they continue with business as usual.

Children living in poverty, people depending on food banks to feed themselves and their families, some having to defend themselves in an over complicated legal system because of cuts to the legal aid budget, old people dying from the cold because they cannot afford to turn on the heating, people being attacked by our police for simply carrying out their democratic right to demonstrate against crucifying cuts that effect the poorest in society the most, while protecting the most well off, who avoid paying their dues by hiding money in offshore tax havens is not a society any of us voted for, yet it is the one we all live in today. Ours is not a society I feel proud of, in fact I feel deeply ashamed of it.

In my next article I will look at our governments plans to abolish the Human Rights Act and introduce a British Bill of Rights. This proposed attack on our fundamental rights as British citizens is a step too far in my opinion. So I urge each and every one of us to make a stand against capitalist elites and their unquenchable thirst for more. The vast majority of us have a very powerful tool at our disposal, the internet. So I encourage you to checkout the list of websites below, do your own research for local organisations and join those that represent your views. Information is power.

Let’s bring the “we” back into British society and together we can build a better and brighter British society that works for all citizens, rather than just the richest 1%. We cannot depend on our politicians and political system for democracy, it must be of our making.

 Assemblies for democracy,               
 An agreement of the people,               
 A world to win,                                 

 Corruption Watch UK                           

Democracy Club                                      

Democracy Space (in the process of being setup)

No comments:

Post a Comment