Brown: The collapse of the UK economy was down to me

Gordon Brown today admitted he made a mistake in not introducing tougher bank regulation when he was chancellor.  The PM, chancellor from 1997 to 2007, said that in the 1990s the banks had all been calling for less regulation.

"And actually the truth is that globally and nationally we should have been regulating them more," he said in an interview on ITV1's Tonight.  The Conservatives said Mr Brown had "failed", while the Liberal Democrats said his admission was "not enough".  The prime minister said he should have put the "whole public interest" before the banks.

Mr Brown said: "In the 1990s, the banks, they all came to us and said, 'Look, we don't want to be regulated, we want to be free of regulation'." ... "All the complaints I was getting from people was, 'Look you're regulating them too much'. And actually the truth is that globally and nationally we should have been regulating them more," he added.

"So I've learnt from that. So you don't listen to the industry when they say, 'This is good for us'. You've got to talk about the whole public interest."

Ed Balls, who worked with Gordon Brown when he was chancellor, said both had previously admitted they should have done more to control the financial sector.  At Labour's morning press conference he said: "In retrospect we should have been tougher with some of the investment banks which did not know the risks they were running."

Business Secretary Lord Mandelson added: "Regulation should have been more intrusive and the regulatory practice of the Financial Services Authority should have kept pace with the fast-changing developments in the financial services sector."

Shadow chancellor George Osborne said: "So finally Gordon Brown admits he failed to regulate the bankers and increased taxes on the poor (removing the 10p tax band). We've had 13 years of his economic mistakes. Britain can't afford five years more."

Lib Dem Treasury spokesman Vince Cable said: "It's not enough just to hold your hands up and say sorry without having a plan for making sure that the same thing doesn't happen again."

Most people (particularly in the blogosphere) know this already, and many (including myself) believe admitting to being partially responsible for the worst economic mistakes for generations is not enough (i.e honesty) - if he had represented us properly (which as Prime Minister is his job!) he would have always acted in our interests (not the banks), if he was a capable leader he would have asked far more questions (rather than simply listening to the banks), and if he was selfless, honest (and honorable) he would have admitted his mistakes at the time (and resigned without question or delay) ... instead of using spin to create a smoke-screen (e.g. a 'global problem') and deflecting blame onto others (e.g. America - which President Obama will never forget) ... both strategies regularly adopted by those who apply Poweromics* (to maintain their grip on Power).  Given we are fining the leaders of Northern Rock for their failings, perhaps we should fine/charge Gordon Brown for his role too**, so he is made bankrupt, never forgiven and never allowed into a position (or to profit from a position) of power again (e.g. relinquishing any right to a position in the Lords)*. 

* Poweromics = People using position and power for their own personal gain, based on poor moral values, self interest and greed. 

** NB In China he would have been locked up and probably receive the death penalty (for 'economic sabotage').

Masters or Servants?

Nick Clegg, the Liberal Democrat party leader, unveiled five proposals to control "the bonus culture" in the City. Clegg said there should be "no rewards for failure" and called for a "top-to-toe" overhaul of the British banking system (including an end to "morally obscene" salaries and bonuses).

"The problem started with the banks so the solution must start with the banks too," he said at the party's daily news conference yesterday, and he said the public should feel that "never again are your everyday savings held "hostage" by people in the City.

The Liberal Democrats' five-point plan to reform the banking system would:

1. Limit cash bonuses to £2,500 annually, with any bonuses in excess of this figure to be paid in shares which could not be sold for five years
2. Ban board directors from receiving bonus payouts
3. Extend the Financial Services Act so loss-making banks were not allowed to pay bonuses
4. Ensure the names of all banking employees earning more than the prime minister were published
5. Lead to directors of banks being fined if their institution broke the industry's code of practice

These five steps would "transform the culture of greed which continues to disfigure the banking industry in this country" and ensure the banking system became "the servant, not the master", Mr Clegg said.  

The party's Treasury spokesman, Vince Cable, said the UK was "still in a major economic disaster" and that "The country is now poorer than it was before the banking crash and what we need to be focusing on is how we prevent it happening again” (echoing many of the posts on this blog).

Mr Clegg said it would reveal a "new approach" to a financially-stable economy, based on equity not debt, "where we learn as a country to build things again, not just bet on things on computer screens in the City" … from a leader who may well yield significant influence/power in a few weeks time this is good to hear, but he will need to think more carefully about the steps needed to successfully transition from an outdated and flawed economy (Poweromics) to a 21st century value adding economy (Leanomics) … and just like President Obama made clear, we must ensure the banks pay taxpayers every penny back (and make sure investment banks are separated from commercial/high street banking too).

In my humble opinion, Vince Cable appears to be the closest to identifying what a successful 21st century economy needs, having also hosted sessions promoting the introduction of a Land Value Tax (to replace unjust/unfair taxes) for instance. The Liberal Democrats also want to completely overhaul the archaic (19th Century) voting system, so MP’s properly represent (and are held accountable to) the people they are supposed to serve. 

If you’re relying on others to help you – good luck – you’ll need it. Labour are relying on spin and clearly cannot be trusted e.g. this week Brown stood up to tell us there will be no more income tax rises … but he said that last time, and watch out for National Insurance everyone, which is just another name for the same thing (n.b. they’ve given no guarantees on this one and Brown has also raised it before) – why did the press (e.g. the BBC) not ‘press’ him on this…?  As for the Tories, Cameron has said he wants to give people ‘power’ (e.g. by letting parents set up their own schools – more of a gimmick than a practical solution), but at the same time has no desire/interest in changing how MP’s are given power or wield (e.g. profit from) power.  Instead the Tories want to slash public spending, change inheritance tax laws to favour the rich … and would vehemently oppose changing/removing unfair taxes and replacing them with a Land Value Tax (as the Tories represent, and are heavily backed by, all the rich land owners/bankers profiting heavily from land without adding any value at all). 

The election provides an opportunity to allow a little more common sense to filter into our Economic/Political System (e.g. values, fairness, justice) and if this happens our failing economy may actually start to turn around.  If it does not it will simply continue its downward spiral (don’t be fooled by any apparent ‘recovery’ – as the Government simply postponed all the ‘pain’ until after the election) until the situation gets so dire that people finally decide to do something about it – but at this stage it’ll probably be too late to successfully turn things around (NB I do not support any political party and like most people hold the vast majority of MP’s in contempt – however I do care about people’s future, the state of the economy and the level of democracy in the UK).

Let’s see what the next few weeks hold …

Employment down - Economically inactive up

Every month the Office for National Statistics publishes the UK's unemployment figures. But the report doesn't just give the big numbers. It includes a fascinating breakdown of the UK at work - and out of it.

Here are few things we learnt this month:

1. There are fewer people employed than at any time in the last 12 years.

The employment rate in the three months to January 2010 is 72.2% - it fell by 54,000 on the quarter to reach 28.86m. 

2. There are over 8m 'economically inactive' people in the UK.

8,157,000 people between 16 and retirement age to be exact - of whom 71% do not want a job. The biggest group are the 2.3m people looking after their families - up by 32,000 on the year. Next come students (2.3m) and the long-term sick (2m). 74,000 are 'discouraged' - up by 21,000 on the year.

3. If you work in the private sector, wages are going down … in the public sector, they're going up.

Average weekly earnings in the private sector are £426 per week - down 0.7% on January 2009. In the public sector, they're higher - £461 per week, up 4.1% on Jan 2009. 

4. Public sector jobs are still going up.

6m people are employed in the public sector - +46,000 on the year. 21.1% of us work in the public sector. The biggest percentage increase has been in the NHS - up by 4% on the year to 1.6m people in January. In contrast, private sector employment is down by 527,000.

5. There are more long-term unemployed

Those unemployed over six months has gone up by 58.7% to 549,000 people.

6. More of us are part-time

Part-time jobs are up - by 1.3% or 87,000 on the year. Meanwhile full-time employment has gone down by 3.4% (-642,000).

7. There are less young people employed

Employment is down for 16-17 year-olds (by 22.2% or 109,000) and 18-24 year-olds (down 6.6% or 237,000).

This is just the tip of the iceberg. Yet the BBC headlines prefer to tell us how unemployment figures are down! I wonder why?

Economic Justice: Land Value Tax

The Coalition for Economic Justice recently organized a House of Commons Seminar on Land Value Tax, hosted by Vince Cable MP. The seminar was aimed at parliamentarians and policy makers and saw a packed house. It examined the advantages of land value taxation, how it might be introduced and how transitional problems could be dealt with.

"Sir Sam Brittan (Financial Times) said the case for LVT was clear and simple. But perversely, people find this difficult to grasp; they expect complexity in taxes. Being a tax on unearned value increment, LVT was no disincentive to Labour or Capital. As a temporary expedient, pending the full introduction of LVT, he advocated the auctioning of planning permissions.  

Ashley Seager of The Guardian cited instances where public expenditure had led to massive increases in property (i.e., land) prices. In one case, the building of a school had led to such a big increase in local property prices that teachers in the school could not afford to live in the area. As the land of this country is provided free of charge by nature, “rising property prices do not raise national wealth one single penny”. They serve no useful economic purpose and are an obvious target for taxation. 

Professor Iain McLean (Politics, Oxford University) explained how, as a member of the independent expert group set up by the Calman Commission, he was looking at LVT as a way of financing public services in Scotland and Wales. LVT would replace council tax, business rates and stamp duty. 

David Triggs (Henry George Foundation) in the opening address also highlighted “The challenge that confronts those interested in establishing a just and equitable division of the fruits of production lies essentially in recognising that land values impound that part of the value created which is attributable to factors external to the individual, e.g., the country’s infrastructure, the system of governance, law and order and the density of population. It is manifestly unfair to tax the individual on what he produces while those community-created values are provided tax-free to the benefit of the landowner. These land values, arising essentially from location, should be the primary source of taxation.”  

Fred Harrison (Land Research Trust, and author of 'Boom Bust: House Prices, Banking and the Depression of 2010') reinforced this message. He showed how failure to collect location value led to diminished opportunity and life expectancy at the marginal location. James Black (a sixth-former) said LVT made common sense to the young and the opportunity should not be missed". 

This seminar was the first step in a campaign to interest parliamentarians in the formation of an all party parliamentary group on Land Value Taxation.  However a lot more work will be needed due to counter the huge vested interests of those who currently accumulate great wealth without adding any value, and who will resist the introduction of such a tax using all their influence, power and wealth.

Strictly Come Dancing in 'Jonestown'

Another interesting post from a fellow blogger to ponder ... referring to the ignorance and/or apathy of British people (Type 1 & Type 2 Ignoromics) and the types of challenges involved in addressing it.

"... I am quite happy building my boat. The advantage of an island is it is easy to leave it.

You are wasting your time with your rabble rousing, the rabble are sleepy and prepared to drink from the poisioned chalice, just like in Jonestown. Too much Strictly Come Dancing. The enormity of the problem is not the debt, solved by cuts, or the government, solved by a General Election, it is the decades of destruction of a wealth producing sector.

How do you think new wealth is to be created. Let me guess - by training. No. By a cultural shift. Do you know how hard it is to shift a culture, you have no idea, you are part of the culture, you are thinking within it. You have already lost because the culture has lost.

The only route for many is the decline cycle, a form of economic cannibalism. Enjoy. Oh, do you want to supersize that? Reality check time. What was Gordon's big idea, oh yeah, lets ask the Chinese to open factories here, 100s of them. What a lunatic. The Chinese will only buy strategically and will seek to develop their domestic scene, they have said as much by their actions.

And we have various bodies talking things up, like Lord Turner - 'When we get more affluent we will want to fly more' so lets develop air travel and punatively green tax those who dont fly. No oil has peaked already by some estimates. We should be seeking to reduce air travel.

The establishment is part of the culture. Members of the establishment support the culture because it rewards them individually ..."

Are such insights misguided, or getting too close to the truth ? ... you decide!