Legislation of fiscal surpluses is both unnecessary and unwise.

Our chancellor’s new plan to legislate fiscal surpluses is an attempt to return Britain to Victorian values. He has even revived the Victorian Commissioners for the Reduction of the National Debt (a body that last met in 1860). His justification or rational is that the crisis was due to Labour’s irresponsible borrowing when it was in office. The opposition cannot be trusted unless it admits its guilt and promises to follow Mr Osborne’s guidelines. Social democracy would be neutered, forever. But the fundamental message here that labour has never been able to portray is that Mr Osborne’s accusation is a lie. The reason we have £1.5trillion of debt is not because labour were irresponsible with the nations credit card in order to reduce child poverty, enhance public services, or give young people leaving school with few/no qualifications a better chance in life.

Instead, the vast majority of our national debt, £1.3trillion in fact has come from bailing out the banks, following the 2008 global financial crisis that the banks caused trough their irresponsible lending and activities in the shadow banking market. Worse still, having lumbered the banks debt onto the British taxpayer, the chancellor has failed to impose proper regulations on the banks and allowed them to continue with business as usual. It is because of the banks debts, which they caused, that Osborne introduced the bedroom tax, cuts to welfare benefits, cuts to legal aid, cuts to local authority funding, the freezing of all public sector workers pay, but MP’s are due to receive a £7,000 pay rise despite 88% of respondents to a public consultation carried out by IPSA said no to the pay rise for MP’s. IPSA have said unless they receive compelling evidence against the rise by 30^th June, it will go ahead. What more compelling evidence could there be than 88% of respondents in a public consultation saying no? While our MP’s enjoy a 9.2% pay rise, our government are planning a further £30billion in cuts to public sector spending over the next 2 years, including a £12billion cut to the welfare budget. This is not democratic.

The reason our chancellor wants to legislate for all future governments to achieve an overall fiscal surplus, effectively meaning no government can borrow in “normal times” equally applies to the planned law not to raise the main rates of income tax, national insurance and value added tax until 2020. The answer is that these laws are a political ploy. It is political game playing with the labour party. If the government is to achieve an overall fiscal surplus and taxes are not to be raised, then spending must first be cut, and then kept at a level, relative to gross domestic product, achieved only twice in the past 70 years. If Labour supports the Conservative laws, it embraces a relatively small state forever, but if it opposes them, it is condemned as a tax and spend profligate. This is a deliberate political trap. How clever it turns out to be depends on whether enough voters believe the ideas make sense and I believe that here the chancellor has underestimated the intelligence of the electorate.

Mr Osborne and the conservative party argue that the crisis has proven the need for a surplus in normal times. In other words, that we would be better prepared and the effects of another financial crisis would be lost profound if we were not already in debt when the financial crisis happens. However it would have made little difference to the effects of the financial crisis in 2008 if labour had run a balanced budget before it. In both Ireland & Spain for example, they had been running a balanced budget before the financial crisis, yet the financial crisis devastated both these economies. Osborne also argues that the strong recovery of the UK economy proves fiscal policy is not needed. So abandoning fiscal flexibility would be no loss. But the truth is that the UK recovery has been very weak. The return to pre-crisis levels of real GDP per head has taken two years longer even than in the Great Depression. This is so even though the chancellor abandoned many of his planned cuts after 2011-12.

A third argument from Osborne is that a fiscal surplus is a hallmark of prudence. Yet the focus on public debt alone is mistaken. Crucially, it ignores the asset side of the balance sheet altogether. Moreover, all things being equal, the bigger the fiscal surplus, the lower interest rates would be. If that encouraged a run-up of private debt, the economy could end up even more unstable. Alas, the Office for Budget Responsibility already forecasts a big jump in household debt. A more sensible argument would be that, even if fiscal irresponsibility neither caused the crisis nor created difficulty in managing it, as proven by low real and nominal interest rates, public debt must now fall relative to GDP. That would restore the “fiscal space” used by the rise in net public debt from 37% of GDP in 2007 to 80% today.

As Mr Osborne well knows, there are alternative measures that can be taken to reduce our national debt in the long term. It does not all have to be done right away. In fact the ratio of our public debt to GDP is well below it’s average over the past three centuries. Naturally, such considerations including the case for fiscal stimulus apply only if a country has fiscal space. But markets and the IMF agree that the UK has such space. It is clear that the obsession with public debt is unhealthy. Public borrowing is not always an evil. Nor is private borrowing always a good. It is quite appropriate to borrow to invest. Not least, the time to reduce public debt comes when economies boom and interest rates are far from the floor and despite what the chancellor claims, our economy is certainly not booming.

Explaining that a surplus is not, nor should it be the main goal can easily dismiss this trap being set by the government. More important is the nature, strength and durability of an economic recovery. Also important is how fiscal consolidation is achieved and at whose expense. It should never be at the expense of the poorest and those least able to defend themselves in a democratic society.

Who do they think they are?

In 2010, just after the coalition government had been sworn in both George Osborne and David Cameron told us of the austerity measures that were to come. “There is no alternative” they cried, which of course we now know was not true. As if to offer us some kind of comfort they declared “we’re all in it together” also not true. The first thing George Osborne did was hike the rate of VAT up, from 17.5% to 20% and then gave a tax break to high income earners by reducing the top rate of tax, which is payable only by those earning more than £150,000 per year from 45% to 40%. He also imposed a pay freeze for five years on all public sector workers, which will now in all likelihood last until 2020.

Fast forward 3 years and the Independent Parliamentary Standards Authority (IPSA) who are responsible for MP’s pay, benefits and expenses announce a cut in MP’s benefits, but a pay rise of £7,000 or 10% to compensate for their loss. While there was widespread support for the reform of MP’s over generous pensions and tightening of the rules on what can and cannot be claimed for in expenses, there was equally strong objection to the proposed pay rise for MP’s. The announcement from IPSA came despite their own public  consultation indicating that 88% of respondents were opposed to the pay rise. Even David Cameron called for IPSA to reconsider. Despite a further two reviews, IPSA have announced that unless they receive compelling evidence against the pay rise it will go ahead as from 30^th June and be backdated to April.

I wonder just how out of touch with reality does an independent body have to be to grant a pay award to MP’s at a time with the whole of the nation are suffering our governments’ austerity measures. IPSA claims that MP’s salary is below the average of others working in the public sector. However in 2014 the average salary in Britain was £26,500 per year. Even in the top decile of earners, the average annual salary is £60,500. MP’s currently earn £67,070, which is substantially more than the vast majority of people in Britain. What more compelling evidence could IPSA want than the fact that 88% of people have declared their objections? While some have stated their support for the pay rise, other MP’s have publically condemned it including John Mann and Nicky Morgan.

As if rubbing salt in the wound, IPSA also say that after the pay award, MP’s salaries will be linked to average earnings increases. Using predictions from the Office for Budget Responsibility, MP’s salaries would rise from £67,070 to almost £86,000 by 2019. The Independent Pay Review Body (IPRB) recommended a measly 1% pay rise for all NHS staff last year, but it was rejected by MP’s, so why can’t this recommendation from IPSA be rejected in the same way? The answer is simple. It’s because the vast majority of MP’s welcome the proposal, despite the public objections of a few. David Cameron would see his annual salary rise from £142,000 to £154,000 and as his pension is tied to his final salary, of course he wants the rise also, regardless of what he says in public. The fact is MP’s could block this pay rise in a heartbeat, but they don’t want to. Instead they blame the “independent” body IPSA and make a few noises of objection in public. But the truth is the vast majority want this pay rise to go ahead.

I am well aware there are a number of MP’s who work very hard to represent their constituents and if there is a pay rise on offer, they deserve it. However, over the past few years we have heard of a number of MP’s getting up to all sorts. In 2009 we found out that some of them had been stealing from us, while many others were bending the rules for their own financial gain. We have had numerous scandals where MP’s were caught offering access to senior ministers in return for large donations to their political party, cash for access, cash for questions and MP’s offering to lobby in parliament on behalf of private international corporations. Although nothing has yet been proven, allegations are rife about a Westminster paedophile ring, including current politicians. There have also been allegations of governments having acted to cover up and protect MP’s. Most recently we have had an MP eventually admit he had lied about leaking an untruthful article regarding SNP leader Nicola Sturgeon and one MP in an attempt to defend the accused declared that the House of Commons would empty very quickly if all MP’s who lie were sacked.

We have endured cuts to social care that have meant some elderly people are unable to leave their home, have a daily wash and get dressed. Welfare support for the most vulnerable and disabled in our society has been slashed. People are being forced to represent themselves in court against highly paid and well qualified legal experts because of cuts to the legal aid budget. People are being forced to take on low paid work, just to have some money coming in. More than 1million others are depending on food banks just to feed their families. Another 3.5million people are starving themselves so their children can eat and right here in Britain, the nation with the sixth richest economy in the world, we have 4.1million children living in poverty.

Meanwhile, our MP’s are to receive a 10% pay increase. What kind of democracy is that?

I do not begrudge anyone who works hard and does a good job a decent salary. So I suggest that MP’s pay be set by their constituents and linked to performance. As it is in the vast majority of jobs in the private sector, we could have a set of pay scales drawn up, ranging from the lowest which would be base pay to the highest representing an MP whom their constituents felt had outperformed their expectations of them. This would provide a strong incentive for MP’s to work hard for their constituents and act in the interests of those they were elected to serve. Equally, it would build a stronger relationship between constituents and MP’s, who would have to spend more time meeting and getting to know the concerns of their constituents. Inevitably, MP’s who do not serve well or meet the needs of their constituents would see this poor performance reflected in their salary. This system is exactly how the vast majority of workers salaries are decided and it is how we should be deciding our MP’s salary. Handing control of MP’s salary to those they work for would be fairer and more democratic.

This is how it would be done in a true democracy.

Bung us 40million francs and we’ll say no more about it

The hopes of millions of people across Europe, that Switzerland would join the tiny number of countries taking legal action against HSBC (Swiss) for money laundering were dashed today when Geneva’s chief prosecutor Olivier Jornot announced that a financial settlement of 40million Swiss francs (£28million) had been reached and that the Swiss authorities would be taking no further action against the bank.  The bank was under investigation for money laundering, following when UK channel 4’s dispatches program made public information that the Swiss arm of British bank HSBC had been assisting individuals to hide money from their national tax authorities. The information originally came to light when IT specialist Herve Falciani who was working at the bank in Switzerland turned whistleblower and leaked details of some 106,000 private accounts at the bank.

In the UK, HMRC received the leaked files in 2010. Following the dispatches program in February, it was revealed by HMRC they had identified three thousand six hundred British nationals from the Falciani files, when they appeared before the Public Accounts Committee. Of those, two thousand five hundred were found to have done nothing wrong, as it is not illegal to hold a private bank account in a foreign country. All but one of the remaining one thousand one hundred British citizens, were allowed to pay the outstanding tax plus a small financial penalty of 10% and that was the end of the matter. That means one thousand and ninety nine British individuals were caught red handed evading tax, which by the way is illegal in Britain and not one of them were prosecuted. HMRC claim to have collected £135million in unpaid taxes and penalties. The one individual HMRC did prosecute was found guilty of tax evasion in the amount of £387,103 and was ordered to pay an additional £469,444 in fines and legal costs. Tens of millions in tax evaded and not a single person spent even one day in jail.

It was through a tax amnesty agreement between the British tax authority and tax authority in Lichtenstein that the one thousand and ninety nine individuals were allowed to make financial settlements. The Lichtenstein agreement was set up in 2009 so that British nationals who held financial assets there could declare them to HMRC without facing prosecution. However the agreement had some strict conditions in order for the amnesty to be offered. Firstly, the assets had to be held in Lichtenstein. Secondly, the amnesty could not be used where a criminal prosecution was likely. Thirdly, the claim could only  involve assets about which HMRC were not already aware and the disclosure had to be made voluntarily, without intervention from HMRC. But none of the assets were held in Lichtenstein. All of the individuals had committee tax evasion and therefore criminal prosecution should have been likely. HMRC had found out about the assets through the Falciani files and therefore already knew about all of the assets when the individuals were approached and therefore none of the disclosures had been made voluntarily. The favourable treatment available under this tax amnesty, should never have been given to any of the one thousand and ninety nine individuals concerned.

When giving evidence before the Public Accounts Committee, HMRC chief executive Lyn Homer said that half of these individuals had asked to be given amnesty from prosecution under the Lichtenstein agreement and were advised by HMRC to move their assets to Lichtenstein in order to qualify for the amnesty. The other half knew nothing about the Lichtenstein agreement, but were advised of it by HMRC staff and told to move their assets. This is not just giving out amnesties to tax evaders, it is advising breaking the rules by advising them of the amnesty and how to qualify. It was never the intention of parliament that those caught red handed evading taxes should be given an amnesty, so clearly HMRC are ignoring the will of parliament and applying the rules how and when they see fit. HMRC do not, nor should they ever be given the power to decide if and when the laws of the land are to be applied and when they can be ignored. Their sole remit is to collect the taxes that are due as determined by parliament.

Online campaign group Avaaz who have more than 40million members worldwide, have initiated judicial review proceedings against HMRC in relation to it’s decision to offer the amnesty.  Avaaz’s campaign director, Alex Wilks, said in a statement when the legal action was launched: “If the police extended the terms of knife amnesties to criminals caught carrying weapons, the public would be outraged. Tax officials must urgently explain why they gave get out of jail free cards to so many wealthy tax dodgers.” The difficulty with financial penalties is individuals who are caught evading taxes on this scale can well afford to pay the tax owed plus a small financial penalty, in the highly unlikely event of them being caught. Therefore financial penalties provide no incentive to change behaviours or to think about the consequences of what they are doing, aside from the fact it is illegal. As with the case of HSBC bank in Switzerland and the multiple fines imposed on UK banks in the past five years, financial penalties send out completely the wrong message to those actively and anyone considering participating in illegal behaviour. It says do as you please because even in the unlikely event you get caught, the worst that will happen is you will receive a fine.

Put these individuals or businesses on trial in a court of law and if found guilty, send them to jail for a substantial period of time. Then use the proceeds of crime act to seize all of their assets and reimburse the public purse. Prosecute a few cases in this way and word will spread like wildfire that there are serious consequences for breaking the law in Britain. Such actions will have the effect of focusing the minds of anyone considering illegal activity and it will be an effective punishment for those found guilty. They will think twice before carrying on with business as usual once released. Treating wealthy tax dodgers and banks who help them exactly the same as we treat an individual who over claims benefits they are not entitled to is exactly how things work in a truly democratic society.

It is also noteworthy here that because the Swiss authorities have decided to agree a financial settlement with the Swiss arm of HSBC, information they gained on exactly what the bank had been up to will never be made public. Also, despite authorities in France, Belgium and Argentina having brought charges of money laundering and fraud against HSBC bank, no such charges have ever been lodged against the bank in Britain. Finally, HMRC had powers at the time of the Falciani files case to impose financial penalties of up to 200% of the tax evaded, but it chose not to use them. What kind of democracy is this?

What ever happened to the great British value of we look after our own?

After the atrocities of the second world war, Britain wrote and became a signatory of the European Convention on Human Rights (ECHR). In the same period the then labour government set up the welfare state. The ECHR was agreed and signed by the countries of Europe and is a declaration to the world that the horrendous atrocities that had been seen during the war, must never be allowed to happen again. The welfare state was set up in response to the Beveridge report of 1942 to end rampant poverty in Britain and to look after everybody “from the womb to the tomb.” Both acts were an unequivocal statement of declaration that whether rich or poor, Britain looks after it’s own and such atrocities have no place in a modern society.

Fast forward seventy odd years and of course a lot has happened. We have had numerous wars including the Falklands in 1982, the Gulf in 1991, Afghanistan in 2001, Iraq in 2003 and Libya in 2011. Cars are now seen on our roads everyday, the television was invented, we now have machines to wash and dry our clothes, it is now possible to communicate with people on the other side of the world with just the touch of a few buttons and we have made huge advancements in the development of weapons of mass destruction.

But most damning of all in my opinion is that in one of the most powerful nations of the world, with a population of 60million people we have 4,100,000 children living in poverty. Almost a third, or 32% of British children are living in poverty.       Britain is the 6^th richest nation in the world, with a GDP of more than £1.6trillion and in 2014 we had one of the fastest growing economies in the world, yet in some areas between 50%-70% of children are growing up in poverty, figures from the Child Poverty Action Group show. The figures also show that 66% of children growing up in poverty live in a household where at least one parent works, proving beyond doubt that work does not provide a guaranteed route out of poverty in Britain, despite the tories to the contrary. How did we end up here? What happened to the great British value that we look after our own?

Well despite our best intentions way back in 1945, we never did manage to eradicate child poverty and in 2005/06 there were 3.8million children living in poverty according to the Department of Work and Pensions. This was a rise of 200,000 children since the year before and was described as “a moral disgrace” by children’s’ charity Barnardo’s. Despite numbers falling over the next three years, they had risen again to 3.8million by 2010. In March 2010 the Child Poverty Act was passed, legally binding the government to a commitment to eradicate child poverty in Britain by 2020. For the first time ever, government and local authorities have been set targets to end childhood poverty for good. However almost have way to that target, the figures from the Child Poverty Action Group show that our government is moving backwards instead of forwards.

Given the previous coalition governments’ ruthless commitment to austerity measures, a consequence of the UK banks irresponsible lending and by 2014 had lead to a cost to the British taxpayer of £1.3trillion, it’s no wonder child poverty numbers are rising. The cuts to welfare benefits have seen a cap of £26,000 for any working age adult across all benefits, the introduction of the bedroom tax, a reduction in the child element of working tax credit, cuts to child benefit, cuts in the number of children receiving free school meals, it is no wonder the number of children living in poverty is rising. There is no doubt that by the end of the coalition governments’ reign there were more people in work, the figures speak for themselves. However at least a portion of those new jobs were either low paid, zero hours contracts or self employment. None of which provide any security for Britain’s hard working families that the conservative like to talk about.

Considering their track record in coalition with the liberal democrats, does not speak well for our new conservative majority government, with their plan to cut £30billion from public spending, £12billion of which will come from the welfare budget. Although the government have not yet laid out exactly which benefits will be effected, I fear greatly for our children and those who through no fault of their own, are least able to defend themselves and can least afford further cuts.

People are poor for a great many reasons. But explanations that put poverty down to drug and alcohol dependency, family breakdown, poor parenting, or a culture of worklessness are simply not supported by the facts. Child poverty blights childhoods. Growing up in poverty means being cold, going hungry, not being able to join in activities with friends and it has long lasting effects. By age sixteen, children who receive free school meal achieve 1.7 grades lower than their wealthier peers. Leaving school with lower grades translates into lower earnings, with little prospect of improvement over the course of a working life.

Children have no choice about whether they are born into a rich or a poor family and very few people, if anyone in the history of mankind has ever made a conscious decision to be poor. We have forgotten the commitment we made in 1945 to eradicate child poverty and are well on our way to failing second time around as well. By it’s very definition, in a democratic society there is no such thing as poverty, it simply does not exist. In a democratic society there would not be a scenario where a handful of RBS bankers would receive £484million in bonuses, while 4.1million children did not have their most basic needs met, including enough food, warm clothes and a safe home.

Therefore I submit that Britain clearly is not a democracy.