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Karen
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In the 80s Michael Heseltine wrote:
The waste and hopelessness of unemployment both defy measurement. If the physical cost is great and undiminishing year on year, the human cost is also great and being paid on a constantly rising tariff as children follow parents into unemployment . . . forced into dependence on State benefits. Where unemployment is long-established and deep-seated, its corrosive effect goes equally deep. The rising generation is made vulnerable to the person who says: ‘This is a rotten society . . . why not join us on the streets’. . . Against a background of high unemployment the invitation to crime becomes more appealing. Idleness becomes a resentment that gives crime a defensible normality.
Twelve years later in 2009 Professor Richard Layard and Paul Gregg asked if creating a new lost generation could be avoided. They had high hopes of the new youth guarantee scheme which was to start in January 2010: everyone unemployed for over a year and under 25 was to be offered a job or training.
An online search reveals that Chief Secretary to the Treasury Danny Alexander has said this extension will no longer go ahead, and cancelled eleven other projects set up by the previous government. One is the £290m Future Jobs Fund, part of the Young Person’s Guarantee, intended to create more than 100,000 jobs by March 2011. It was aimed at 18- to 24-year-olds who had been out of work for more than six months. One in five 16-24 year olds is now unemployed, according to figures released in June.
Denmark and the Netherlands are said to prevent long-term unemployment
Layard and Gregg believe that the key is to prevent long-term unemployment in the first place, just as Denmark and the Netherlands prevent it by offering work or training to every unemployed person within a year of their becoming unemployed. They have the lowest unemployment rates in Europe.
They conclude: “We should do the same. For unemployment is a major source of misery. Unemployment reduces a person’s well-being as much as does divorce or bereavement. Afterwards, there remains a lasting scar not only on happiness but also on future earning capacity and job prospects – making long-term unemployment early in life an economic catastrophe.”
Already almost 4000 city families have benefitted from work created or retained by the support, advice and unsecured lending of the ‘not-for-personal-profit’ Aston Reinvestment Trust.
The approach advocated by the Green New Deal and adopted in Birmingham offers constructive work, providing the jobs which would give purpose to skills and training schemes.
At noon on Thursday 9th December the Bank of England’s Monetary Policy Committee meeting’s decisions will be announced.
LWM’s co-founder, Colin Hines, sends news of a report released by members of the Green New Deal group and the consultancy ‘Finance for the Future’, which calls for the Committee’s discussions on when to introduce a further round of quantitative easing (the so called QE2) to include a different ‘green’ end goal for the expected electronic printing of more than a hundred billions pounds (QE1 ‘printed’ £200 Billion).
From the Press Release
‘Green Quantitative Easing: Paying for the Economy We Need’ states that the need to reflate the UK economy has not gone away and that there is an urgent need for action to stimulate the economy by investing in the new jobs, infrastructure, products and services we need. There is no sign that this will happen without government intervention, the report therefore proposes a new round of quantitative easing – a Green QE2.
Green QE2
Green QE2 would use the tens of billions of borrowing do three things:
a. The government would need to invest directly into new green infrastructure for the UK.
b.The government should work in partnership with the private sector, working through a new National Investment Bank, to create new opportunities – and especially green ones – for the UK.
c. The government must liberate local authorities to green their local economies for the benefit of their own communities, and it can do this by providing a capital fund for them to use when working with the private sector on joint venture projects.
These proposals will together inject the money into the UK economy that can kickstart economic activity in this country, reinvigorating government, local government, the private sector and household economies and in the process result in a truly greener country.
The final proposal of the report considers tackling the costly government debt incurred during the PFI process. This would be achieved by using the Green QE2 to cancel this £56 billion debt immediately and to pay off the money owed. Future generations of taxpayers would thus be rid of the need to have to pay for the past mistakes in government finances. The sums involved are estimated over the decades to total a staggering eventual cost of £252 billion. The around £200 billion ‘saved’ could then at least in part be allocated instead to continue to finance Green New Deal initiatives over the decades to come. There would be no further PFI projects, at present projected to initially cost £13 billion, as building and infrastructure programmes would in future be financed through the National Investment Bank proposed in the report.
‘Green Quantitative Easing: Paying for the Economy We Need’ also found that no one is sure for certain whether the first £200 Billion round quantitative easing worked and suggests that several things did happen:
1. The banks profited enormously from the programme, which is why they bounced back into profit so soon after the crash – and bankers’ bonuses never went away.
2. The entire government deficit in 2009/10 of £155 billion was basically paid for by the quantitative easing programme.
3. There was a shortage of gilts available for investment purposes as a result of the Bank of England buying so many in the market. Large quantities of funds were invested instead in other financial assets including the stock market and commodities such as food stuffs and metals. This has impacted on inflation, which has stayed above the Bank of England target rate’
4. Deflation has been avoided, although the relative role of quantitative easing in this versus the previous government’s reflation policies is unclear.
5. Interest rates have remained low.
However, one thing has not happened, and that is that the funds made available have not resulted in new bank lending. In fact bank lending has declined since the quantitative easing programme began.
The report’s author Richard Murphy stated:
‘Quantitative easing programme might be considered a short term success, but the report notes that the benefit has been captured almost entirely by the financial services sector, whilst further asset boom and bust cycles are, at least potentially being recreated with resultant risk to the economy. These are undesirable long run outcomes when the real aim is to get the UK economy working again. For that reason the next round of quantitative easing needs to be green and to improve conditions in the wider economy.’
Contact details
Richard Murphy, Director – Finance for the Future, +44 (0) 777 552 1797
Colin Hines, Convenore, GreenNew Deal Group, +44 (0) 773 816 4304
An LWM associate recently sent news of Birmingham’s Green New Deal to a senior Labour politician seeking policy input, with a printout of the relevant LWM blog.
News of a far longer link was also sent.
The Aston Reinvestment Trust is a project with which LWM’s co-founder Pat Conaty was closely involved.
Adrian Cadbury tells how, during the Aston Democracy Commission, which he set up and chaired, local people brought forward the problems caused by the withdrawal of banks and building societies from Aston because the amount of business being transacted did not warrant the expense of maintaining these branches. People were having recourse to money lenders who often charged exorbitantly high interest charges and to pawnbrokers.
He went on to say that with help from a consultant at the Birmingham Settlement, Pat Conaty, the Aston Reinvestment Trust (ART) was set up as a revolving fund in which money repaid would then be lent to others. Its objective is not to make a profit but to extend its ability to meet the small business need for loans. Applicants would have to show that they had been unable to access funds from banks, that their business was of ‘social benefit’ and formulate a business plan showing their ability to repay the loan.
Steve Walker, Chief Executive of ART, describes ART’s mission: “addressing poverty through enterprise using money invested in ART by individuals and organisations to support those in the local community who are able to create local jobs for local people”. The latest information:
The country’s 70 Community Development Finance Institutions [CDFIs] are seen as a force for social change, with a pipeline and infrastructure ready to deliver finance where it is needed around the country.
In September the Independent Banking Commission appointed by the Cameron government published an issues paper and we have responded by bringing to their attention the regional pattern to the UK banking collapse of 2008. This has crucial implications for the bank reforms that are needed in the UK. But the regional dimension of 2008 has hardly been mentioned in public policy discourse – including in the Commission’s issues paper.
In short -
Although we explain our concerns in detail on a more extensive webpage, in short, we have concerns about the UK banking system that no-one else is addressing. The UK banks that needed the injection of public money as shareholdings in 2008 were mainly those banks which had developed out of regional banks and building societies over the course of the last generation.
The outline map below shows the principal banking groups that were part of this story.
By the end of 2008 only 2 of these banking groups were not under some serious degree of control by the government company United Kingdom Financial Investments.
Lloyds TSB had become closely involved with already tottering institutions in the final months of 2008. However, HSBC and Barclays, the more archetypal London (city) banks, did not collapse in any comparable way. Nothing of this is referred to in the issues paper published by the banking commission. Box I on page 14 would have been where we might have expected to see some reference to the dynamics of the banking collapse.
This collapse resulted from the provincial financial bodies apparently taking ‘globalisation’ to mean that they could borrow huge sums of money in New York and then lend it excessively in a way that bid up property prices in the Celtic territories of the UK, and even more so in provincial England. The importance of ‘regional’ ambitions can also be seen in the crisis in both Spain and Germany.
The Regional Crisis in Germany
In Germany it was the regional banks that got into the sort of difficulty where they needed some sort of rescue. Hypo in Munich and the Saxon Bank were the first to have difficulties. But unlike the UK where the regional great champions could no longer borrow from the New York markets, here it was a case of the German Banks having loaned money to the New York markets and there was now a question mark over how much of it they would get back. The first 2 banks to have to admit they were in serious trouble, Hypo and Sachsen, had been seriously lending money on the New York market through subsidiaries in Dublin, Ireland.
It was in the weekends following the UK banks being taken over by government that other regional German banks had to admit that they were in difficulties, and these are referred to in the outline map below.
Although it was regional banks in both countries that got into difficulty, we must not over look the important difference. Our UK banks were relying on the US money/secondary mortgage markets to fund their lending and even their cash flow. Unlike the German banks that ended up in need of state help, none of the UK banks collapsed because of any gambling of their savers’ money on any more esoteric market than their standard lending – based on the UK residential property values as collateral.
Path to reform
As these UK banks are re-organised and sold off by the state, we want to see the future banks that emerge from this mess reporting to the authorities on a region-by-region basis. This would be the basis of the future structural separability of the parts of larger banks we would like to see. Whether or not they become more regionally owned any time soon, we want their financial health evident and policed on a region-by-region basis.
This would allow banks to be taken in and out of any necessary public custody on a more limited and manageable basis: manageable in both managerial and affordability terms. This would limit the risks to the government’s fiscal position. The banks ‘living wills’, in which the commission are interested, should be written in such a way as to facilitate them being dismantled on a regional basis. Our website also includes pages outlining other ideas on the regionalisation of central banking.
Over time, regionalised separability would foster the development of a more decentralised and less monopolised financial sector. Structure related surcharges on the most centralised banks would probably need to have a role in this process. This regional separability would be a solution more relevant to our national banking crisis than the more discussed issue of a supposed need for ‘casino banking’ to be separated from savings banking.
We hope our regionalisation proposals could be of use to the commission in finding a politically acceptable way forward. The Commission was set up because the Conservatives would not agree to the Lib-Dems’ idea of how the banks should be broken up. On the face of it, it does not seem likely that they should now come round to this concern over ’casino banking’ through any further examination; but neither do we see any logical reason why the Lib-Dems should now rally to the Conservative – or even a conservative – approach.
Our distinct take
We recognise that our proposals are competing for attention against very wealthy and established interests: interests themselves funded hugely by – amongst other sources - the taxpayer. We will follow the Commission’s deliberations as far as resources permit and will look to make further contributions to those considerations when we know more about the direction taken by their thinking.
Andrew Lydon
Tags: 2008, Banking Commission, Barclays Bank, Bradford and Bingley, Credit crunch, HSBC, Independent banking commission, Issues Paper, Livings wills, Lloyds TSB, Northern Rock, RBS, Structural separability
Helena Norberg-Hodge, who recently sent an evaluation of the Food Section of LWM’s Extending Localisation project, kick-started the local food movement in this country by establishing the Food Links programme which was then taken on by the Soil Association. She also helped to set up farmers’ markets in Europe, North America and Australia.
Helena and her partner in life and work, John Page, founded the International Society for Ecology and Culture (ISEC) which promotes locally based alternatives to the global consumer culture by writing, filming and practical action. With Steven Gorelick and other colleagues, Helena and John have spoken at seminars and workshops in many countries, including Spain, Mongolia, Thailand, Bhutan, Mexico, China, France, Canada, South Korea, Japan and India.
She has just sent us news about a forthcoming film, the Economics of Happiness:
“We’re finally nearing completion. We’re planning launches in the US, Europe and Asia in January and February. We’re also finalising promo materials; We’ll send details as soon as possible. In the meantime, there is quite a lot of information on the website: www.theeconomicsofhappiness.org.”
‘Going local’ is a powerful strategy to help repair our fractured world – our ecosystems, our societies and our selves. Far from the old institutions of power, people are starting to forge a very different future…
The Economics of Happiness describes a world moving simultaneously in two opposing directions. On the one hand, government and big business continue to promote globalization and the consolidation of corporate power. At the same time, all around the world people are resisting those policies, demanding a re-regulation of trade and finance—and, far from the old institutions of power, they’re starting to forge a very different future. Communities are coming together to re-build more human scale, ecological economies based on a new paradigm – an economics of localization.
Featuring
Vandana Shiva, Bill McKibben, David Korten, Michael Shuman, Juliet Schor, Richard Heinberg, Rob Hopkins, Andrew Simms, Zac Goldsmith, Samdhong Rinpoche
Read more: http://www.theeconomicsofhappiness.org/about-the-film
A promising introduction can be seen on:
http://www.youtube.com/watch?v=VkdnFYDbiBE
Today it was announced that The Office for National Statistics (ONS) has been asked to devise measures of progress and will lead a public debate about what matters most to people. Read More http://www.walesonline.co.uk/news/uk-news/2010/11/25/cameron-to-propose-wellbeing-test-91466-27713314/#ixzz16GkeAgMY
So will the film will be ‘knocking at an open door’ ? To some extent?
The highest rate of inflation among the original G7 members, is our UK inflation rate. Although there is much doubt about how representative the official UK figure is, no one really believes the official figure underestimates inflation.
This month’s comparable inflation figures are currently
United Kingdom 3.2 %
Canada 1.9 % (September figure)
Italy 1.7 %
France 1.6 %
Germany 1.3 %
USA 1.2 %
Japan -0.6 % ( September figure)
Over a decade after inflation and interest rate management was taken out of the hands of politicians this is an unexpected predicament. The whole logic of the hope of the 1990s was that the UK would have a sounder monetary system if politicians and their short-term agendas were taken out of this level of economic management. That was supposedly the lesson of experience overseas.
In 2010, one now has to ask whether price stability would have been better served, had it been something for which Gordon Brown, Alistair Darling, George Osborne or David Cameron had still been answerable every week at Question Time. This would have been a question that would have been asked for some years now, had not the entire political class rallied behind the Monetary Policy Committee system that New Labour used to claim was its most important reform.
UK inflation has now been above its target for a very prolonged period. By contrast none of the other G7 has above target inflation. The standard G7 target is 2 % or less. An inflation rate of zero would be seen as the ideal. But here the UK is the odd man out. Our central bank would have to explain itself if the inflation rate was less than 1 %. Such a rate would be treated as as form of deflation, something to be averted here in the UK, unlike in other countries. Other countries trust their inflation indices and if inflation is reported as being about zero, that would not be regarded as a potential economic crisis but as an achievement.
The UK inflation indices are currently being reviewed by the UK Statistics Authority and we have been making representations to them about how our inflation indices can be more securely based. Details of the lessons from other countries can be found in our September report.
Should global inflation not fall back as the Bank of England hopes, the UK would be further blighted by already having the highest inflation. In our previous reports we have emphasized how global food, energy and resource prices are being driven up by ecological and population pressures. Being 
geared to respond to this sort of inflation will become the main challenge of economic policy across the planet.
However, the 
recent concern over ‘Currency Wars’ needs to alert us to another aspect of the global price shift that none of the mainstream economic commentators have picked up on. The US wants the Chinese to allow the Yuan to rise against the Dollar and other major currencies, so that Chinese made goods are not under-priced in comparison to other producers (and especially the US). However, this must necessarily mean that the price of the goods China manufactures will then rise alongside food and resource prices. Against this background, the Bank of England’s confidence that inflation is temporary, even if an increasingly long ‘temporary’, seems very complacent.
One of the major reasons why the Bank has got away with such complacency, is the very poor scrutiny they come under from the mainstream media. Most months the announcement of the official inflation figure is accompanied in many media by an economist from the banking sector telling us that inflation is not the real worry, and that interest rates need to be kept down. At the moment the profits and bonuses in the banks are largely the result of them being able to borrow off the public at the historic lows and lend out at much higher rates.
This usually goes unquestioned by the media, adding to the confusion over inflation in this country and the negligence with which it is addressed. It is at its most objectionable when the BBC allows the bankers to spread this confusion through a media service paid for by taxpayers. This month BBC 24 had on the economist from the investment bank Investec, last month it was his counterpart from HSBC.
The BBC tends to say that the difference between the Consumer Price Index (CPI) rate of inflation and the Retail Price Index (RPI) rate of inflation is that housing costs are included in the RPI. But this is an over-simplification bordering on misrepresentation. There are housing costs in both indices. When we look back on the biggest house price bubble in British economic history over the last decade, no one can argue that even the RPI registered the cost of housing in such a way as to prompt the adjustment of interest rates to curb it.
By contrast in the USA, once house prices reached 4 times average houshold income in 2005, this cost had such weight in the US Consumer Price indices that it raised the inflation figure. This raised the alarm with the central bank that prompted the interest rate increase that brought their relatively minor house price boom to an end. House prices fell back to below their long term trend of 3 times household income. That American Consumer Price Index is an index that can be properly said to take housing costs into account. The current high level of our RPI inflation has nothing to do with the fact that our UK houses are still over 4 times average household income. While the RPI might talk the talk about taking housing costs into account, it does not walk
the walk in the way that the US consumer price indices do.
Stephanie Flanders, the BBC’s economics editor is listed as a member of the ONS’ s advisory committe on the inflation indices. ( Their current report can be found as the 15th document on the list that can be found by clicking here.) This advisory committee has resisted change to these poorly constructed indices since before the 1990s. They are now proposing the most minimal of changes to the current indexing system while supposedly accepting that housing costs must be better represented in the index. There is a graph on Annex A-9 of their report which shows how neither of their preferred options for change regarding housing would have changed the inflation figures during the ‘boom’ by very much and so would not serve as any alarm in future. Their new figures would not be significantly different, whatever the advisory committee say.
In any event, properly involving housing costs in the indices is only part of what we want to see. Regionalising the indices is even more crucial as we explained in last month’s report.
Andrew Lydon
Regional Prosperity & Inflation Project
Tags: Bank of England, BBC, French inflation, German inflation, Global resource prices, housing inflation, Monetary Policy Committee, Statistics Authority, UK inflation, US inflation
Labour MP Joan Walley Stoke on Trent North) tabled a Private Members Bill Public Bodies (Sustainable Food) setting nutritional, environmental and ethical standards for the £2 billion of public sector food purchased by the government each year.
It narrowly failed to receive its Second Reading last Friday because there were not enough MPs in Parliament to prevent it being ‘talked out’ by Conservative MPs. Read more on the website of Sustain.
One of Joan Walley’s campaigning venues was Staffordshire University’s Stoke campus where a number of speakers – including the University’s head of catering – spoke of the benefits to be gained from serving fresh, sustainable and locally sourced food.
“Food served within public institutions is often bad for our health, damaging to the environment, and unethically sourced,” said Joan. “This Bill seeks to change this, bringing in legal nutritional, environmental and ethical standards which the public sector would have to meet. These standards would affect hospitals, schools, the armed forces, care homes and all other public institutions.
In a Farmers Guardian comment, Fair Deal Food adviser, farmer Tom Rigby, quoted the Food Programme’s words on Nottingham City Hospital where replacing South American meat with UK produce “has proved cost neutral yet now £55 from every £100 spent goes back into the local economy, it used to be about £5”.
The programme concluded that “if we take the long term view and do what is right for the planet, for health, for the local economy, for farmers and for fair trade we will have a food policy fit for the nation”.
She spoke at the Council House just before the Attwood Awards were given:
Three subjects close to Attwood’s heart and which the Thomas Attwood Society aim to further today are de-centralised democracy, the strengthening of regional economies and economic and monetary reform.
If we look at the strengthening of regional economies then the three awardees – Keith Budden, Jon Morris and Matthew Rhodes – have certainly created a project Attwood would be proud of.
Kirsty Davies 2009 award winner
The project itself manages to offer benefits to both individual households and regional businesses through the implementation of energy saving options. This will mean more business for local industry and reduced energy bills for the householders – definitely a win win scenario. In turn this will generate extra cash which will be an additional bonus for the locality, because if we have more money then we spend more money.
The long term indication for this project is impressive and I hope the 25 year income stream is realized.
I am aware that in the past there was the Warm Front scheme which was available to those on lower incomes. However there are an awful lot of people that fall in the middle – not on the lowest incomes and not particularly wealthy – who would not have been eligible for this scheme, and yet for whom a retrofit or replacement heating is dauntingly expensive. This project has the potential to encompass the full economic spectrum of households across the region.
The emphasis on a local supply chain is something I personally applaud. Too often we as a society have contributed to the demise of Birmingham and UK based businesses by spending our money elsewhere – our Automotive sector is the most obvious example of this and we all know it’s history. This project is a step forward rather than a step backwards and the emphasis on the local supply chain will make a difference to the big business monopolies.
Thomas Attwood’s attack on breaking the monopoly of the East India Company was incredibly successful and showed that Birmingham manufacturers, with the correct support in place, could ensure success in both a national and a global framework. Attwood demonstrated that Birmingham could lead the way forward and this is a sentiment I certainly subscribe to. I also believe that this project epitomizes these ideals and that Birmingham will once again be setting a gold standard for the UK.
Or perhaps, to stay on topic, not a gold standard per se (Attwood have been horrified since he fought against the gold standard) but certainly a world class standard.
We are still in recession, and whilst money is incredibly important we can’t lose sight of other issues which are equally important, such as community.
In a democratic country, community should be at the forefront of our ideals, and community encompasses everyone from an SME such as ourselves where our community is our colleagues and their families, to the wider, local community where our factory is based, to the global community where our finishes are used. The Birmingham Political Union fronted by Attwood was instrumental in bringing democracy to the ordinary man, and today the manufacturer is more of an extra-ordinary man (or woman) as we have watched as whole industries have died around us. This project gives us the opportunity to encourage diversification and investment; to manufacture the future.
Whilst tonight we are not meeting in the sandpit in George Street*, but in much more luxurious surroundings, I am heartened by the wide variety of professions in this room. Together we prove that manufacturing, the environment, local Government and all professions within our community can came together through projects such as this to allow Birmingham to continue to lead locally, nationally, and globally.#
* Reference:
http://bobmiles.bulldoghome.com/pages/bobmiles_bulldoghome_com/walk8.htm
http://bobmiles.bulldoghome.com/pages/bobmiles_bulldoghome_com/more3.htm
The New Economics Foundation The Plunkett Foundation
