By Daniel Margrain
At the beginning of each new year my resolution is to earn enough money to be in a position to pay off my credit cards on time and therefore to ensure my household budget is managed properly. Living strictly within my means on a month-to-month basis is, in other words, something I aspire to. The problem is I, and millions of others, rarely achieve it.
Many of us are only able to scrape by month-to-month because we pay the minimum amount on credit cards we have exhausted. The rules of the capitalist system are such that the availability of unlimited credit for the masses is not inexhaustible. There are limits to which the financial system will bail us out.
Ultimately, in the Hobbesian ‘war of all against all’, the fight for survival by any means necessary becomes the guiding principle in order that the necessities of life can be sustained. The mantra often repeated by elite establishment politicians and their corporate overseers, is the need for the masses to ‘stand on their own two feet’.
The derision by the elites of ‘big government’ and the favouring of the ‘invisible hand’ is matched by the supposed need to strip the state to a residual government limited to maintaining law and order and contract enforcement. And yet in the periods when the capitalist system, and those who disproportionately benefit from it, fail – as it did in 2008 – the state will intervene to save the system from itself.
Following the 2008 crash, over £1tn of public money – with almost no conditions attached – was poured into the banking system In 2012, the stated intention was that this windfall, by way of quantitative easing (QE), was to be pumped into the local economy. But between 2011 and 2013, bank lending fell dramatically, helping to stifle economic recovery.
Rather than being used for production and consumption, the money went into speculation and share buy-backs in order to re-boot the profits of banks and hence the ‘bonuses’ of bankers. Consequently, in 2012, 2714 British bankers were paid more than 1m euros of our money – 12 times as much as any other EU country, ostensibly to alleviate a crisis that they helped cause.
In 2012, after the EU unveiled proposals to limit bonuses to either one or two years’ salary with the say-so of shareholders, the Treasury – at British taxpayers expense – challenged the proposals at the European Court. The entire British government demonstrated, not for the first time, that it was one giant lobbying operation for the City of London. Instead of the prospect of facing jail as was the case with bankers in Iceland, British bankers enjoy state aid on an unprecedented scale.
The Governor of the Bank Of England, Mark Carney’s announcement last week that the BOE intends to expand its QE by £60bn in order to ‘stimulate the economy’ is a deception. The truth is, the socialization of private banking debt that contributed to the 2008 crisis is being repeated with all the terrible consequences that this entails. Limiting the ability of the state to boost investment to the local economy, will do nothing to stimulate growth.
It’s clear that the principal objective of the UK tax system, in which the poor pay a higher proportion of tax than the rich, is not to improve the collective well-being of society, but to funnel cash to the wealthy and gamble it on the roulette tables in the City.
In terms of the former, for example, previous Conservative Secretary of State for Work and Pensions, Iain Duncan-Smith received 1.5m euros in income support during the last decade by way of farm subsidies from taxpayers, while the estate of Tory MP Richard Drax, received £13,830 housing benefit in 2013. Both Duncan-Smith and Drax are wealthy benefit claimants who advocate slashing state support for the poor.
In terms of the latter, the Tories introduced £12 billion of cuts – the pain of which is being felt by the most vulnerable – and rushed through the sale of £2 billion worth of the 79 per cent stake the government has in RBS. As a result, it was the taxpayers who lost out on a potential £14 billion return.
Taxpayers also lose out when the rich fail to pay their fair share of tax. Tory aristocrat, Gideon Osborne, who at one stage was widely tipped to take over the reins of PM from his friend, David Cameron, had, unsurprisingly, failed to fulfill his promise to take action on tax avoidance. The fact that his family business routinely avoids tax, probably played a part in the decision.
The real benefit-spongers are not those who feature on low-brow documentary programmes, but rather they are the elites who occupy the corridors of power. If the richest 1,000 people in Britain that have seen their wealth increase by a massive £155bn since the economic crisis began in 2008, were to actually pay their fair share of tax, the deficit the government assures us needs reducing, would be wiped out at a stroke.
But there is no priority within government to insist that corporations cough up. Asda, Google, Apple, eBay, Ikea, Starbucks, Vodafone and others, all pay minimal tax on massive UK revenues, mostly by diverting profits earned in Britain to their parent companies, or lower tax jurisdictions via royalty and service payments or transfer pricing.
The £1 billion that Gideon gave away to his pals in the city on August 4 last year in the RBS share giveaway would have gone a long way to fund the deficit in the NHS, whose trusts claim are ‘unaffordable’. In addition, the Panama Papers revelation that 9,670 UK companies are implicated in a global web of corruption and tax avoidance, would have resulted in a huge surplus. According to Tax Research UK the amount of UK tax that is either avoided, evaded or uncollected currently stands at a staggering £114.4bn and rising.
Many of the corporations of the kind outlined above who evade or avoid tax, benefit greatly from public money invested in, for example, railway and road infrastructure. This infrastructure helps ensure that the labour force, who do pay their taxes in full and who the corporations exploit, are able to arrive at their workplaces in order to produce the profits for these corporations.
The problems associated with the corporate underpayment or non-payment of tax in terms of the reduced revenues accrued to the exchequer, is compounded by the state underwriting of the portfolios of a multitude of other corporations, many of whom deliver ‘public’ services.
The railways are a case in point. State spending on privatized railways are six times higher than they were during the last years of nationalized British Rail. This is despite the fact that under the privatized system, rolling stock is replaced less frequently, there is inadequate carriage space to accommodate rising numbers of rail passengers and ticket prices are the highest in Europe.
The ‘gushing up’ of redistributed wealth from the bottom to the top of the socioeconomic pyramid doesn’t end there. Big business is also dependent on the state in terms of the underwriting of low pay by way of tax credits which cost the tax payer £29bn in 2015/16. The same principle applies to the £24bn spent on housing benefit which goes straight into the pockets of landlords.
With tenants driven into the expensive private rented sector, largely as a result of the inability of successive governments to built adequate levels of affordable council housing, housing benefit impacts in three key ways. Firstly, it acts as a subsidy for low wages. Second, it contributes towards higher rents for private landlords, many of whom, unsurprisingly, are MPs.
In fact, almost a third of MPs let out houses or flats, an amount that is rising. This compares to just 2 per cent of the general adult population who rent out properties. Finally, the third way housing benefit impacts on housing, is the way it distorts house prices. Crucially, the notion that it benefits poor people in the way that the media often depict, is false.
As Craig Murray puts it:
“….The brilliance of the trick is that, as it is labeled a benefit, the left fight to keep housing benefit as though it benefited poor people. In fact this is a great illusion. It does nothing of the sort. What would truly benefit poor people is lower rent or affordable homes…
“The landlord class benefit not only from the taxpayer giving them enormous rents, but from the possession of artificially inflated property on which they can raise further money for more speculation…. The reason that [the governing political elite] has not made a serious assault on housing benefit is that it puts money straight into the pockets of most of [their] Tory chums.
The largest benefit recipients in the UK are the great landlords….[P]umping in 18 billion pounds of state money a year to rents adds 288 billion pounds to property values.That explains how you reach the apparently impossible situation of median property at twelve times median income.”
Our elected representatives who ought to be working for the public good, are instead frittering away public money into their own pockets and those of their corporate benefactors. This is not only unjust but is not sustainable. Big business decision-making has become largely risk free, underwritten by the state.
This isn’t free-market capitalism in the formal sense, but socialism for the rich – a form of state capitalism – no different in principle to the old statist economies of the former Soviet Union. In other words, the elites are immune from the rules of capitalism the rest of us are forced to abide by.