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The NPF Economy, Business and Trade Report – some progress made, but a long way to go

In contrast to most of the other NPF Policy Commission reports the Economy Report proposals are more reflective of the new “Corbynite” Left Keynesian agenda than the poor quality material it produced prior to the General Election. This is obviously good in itself, but peculiar in policy development process terms. Thus, this latest report “touches base” on pretty much every key 2017 Manifesto commitment on the economy, and overall has a mildly Left Keynesian anti-austerity content and flavour throughout. Whilst those of us who have contributed to the NPF processes all year on this report obviously hope this improvement is partly based on our contributions, the marked Left Keynesian shift of this document is mainly due to the need to play catch-up with the hugely successful 2017 Labour Election Manifesto. A Manifesto which so confounded the massively dominant narrative within the PLP and Party bureaucracy according to which a reforming anti Austerity Left leaning approach could only spell electoral disaster. This is the political reality behind the upbeat statement in the Report’s introduction:

We can now see widespread excitement about transformative economic ideas … Labour should be proud of our role in challenging Tory Austerity and shifting the economic debate towards our socialist alternative.

Now this is an entirely back to front reality to what Labour’s policy development process should be, i.e. extensive background research and the wide consultative discussions of the NPF processes should lead TO the content of the Election Manifesto, not the Manifesto content (written by Andrew Fisher, possibly with a few helpers) driving the later follow-up NPF Report content.

The Structure and Content of the Annual Report

Whilst there is plenty for “Corbynist” Left Keynesians to firmly nod in agreement with in the report, it is still, in overall structure and methodology, just as lacking in a solid researched evidence base as the NPF reports have always been. This is not to deny that there are plenty of politically and economically correct objectives outlined, and briefly outlined key policies stated. For that we must be very grateful. It is after all a real turnaround to see a Labour Economic Policy document containing criticisms of the national sovereignty destroying, neo-liberal TTIP and CETA type trade deals. (Remember that in the 2015 Manifesto, TTIP was enthusiastically endorsed by Labour!) It is similarly gratifying to see several favourable mentions of the need to “strengthen trade union and worker rights” and the importance of workplace collective bargaining.

It is also important that in the 2017 Manifesto, and NPF Report, Labour recognises the need to tackle the UK’s chronic low productivity crisis, and wants to create a new “industrial strategy” via a large scale consultation process, and wants to support and grow our SME business sectors, particularly high tech companies. It is similarly very useful that Labour wants to create national and regional Investment banks to fill the UK business funding gaps along with a National Transformation Fund for UK research and development.

But we need to understand the reasons why our economy, dominated as it is by financial services and the service sector, is so highly dysfunctional i.e. why it is sectorally and regionally, unbalanced, increasingly financialised, short-termist, privatisation obsessed, low wage, low skill, low productivity. Without that the ambitions of a Labour alternative programme will not get beyond incoherent isolated policies relating to no clear comprehensive national economic objective.

Things to be fully welcomed – and shortcomings

There is therefore a lot to be welcomed in the Report, (and not forgetting useful subsidiary supporting reports, e.g. the Richer Britain, Richer Lives – Labour’s Industrial Strategy and the recent report to John McDonnell on Alternative Models of Ownership). However, even in these documents, we find an apparent outright rejection of any state directive planning role in implementation. Without that a Labour Government will be left with little real power to change the over-financialised, London/South East centric imbalance of our economy very much. Labour apparently currently disagrees. Thus in Richer Britain, Richer Lives, it is said regarding the restructuring of the UK economy;

This is not about old-fashioned “command and control” …

But instead,

… the public sector makes strategic investments to catalyse the private sector to innovate across different sectors to meet the key public policy challenges of our age — from climate change to changing care needs in the context of an ageing population.

And, we must assume, the public sector will in the process consult and persuades the private sector to ‘do the right thing’.

Well, I disagree. The actual experience of the relatively ambitious 1964 to 1970 Wilson Labour government for instance was that ‘indicative planning’ alone, trying to gently ‘nudge’ UK business sectors in a desired direction, simply doesn’t work – compared to the more directive (dirigiste) state-led planning role of for instance the French state (or the Japanese or Singaporean).

Even the ambitions outlined in the Report, i.e.

… an ambitious plan to radically transform and upgrade and re-balance our economy … high growth, high skilled, high wage … economy.

Are then seriously undermined by the statement that all interventions will be

… within the constraints of Labour’s Fiscal Credibility Rule…eliminate the current spending deficit … five year rolling programme , while ensuring government retains the flexibility to invest …

The wider political reasons for the adoption of this “Fiscal credibility Rule” are clear. And it is true that Labour’s position on the rule does give some leeway for deficit revenue budgets and enhanced capital spending. But the Rule, and the whole idea of “balanced budgets being intrinsically good” is economic nonsense – particularly for a leftish government aiming to transform a structurally deeply dysfunctional economy, and therefore requiring to make considerable , targeted, “counter-cyclical” spending , both revenue and capital to rebuild our economic base, and to sustain our vital , economy supporting, Health, Education and Welfare services, even when this does increase the budget deficit and the National Debt. This is not to suggest that the government can borrow unlimited amounts, without incurring severe inflationary consequences, but the current interest on our national Debt to GDP figure is only 3%.

Yes, I say ONLY 3% – even if that is the interest on the current total National Debt of £1.7 trillion. Contrary to the “UK debt is out of control” propaganda used to justify The Tory austerity offensive – this is well below any sustained period since 1916, with the exception of the period of the last Labour Government (where “off balance sheet” PFI borrowing cooked the apparent figure somewhat). See the graph below for evidence. There is plenty of “headroom” for a reforming Labour government to borrow a lot more to restore our economic health, with no unmanageable resulting debt burden.

Labour needs to be more confident in standing up to the “a country’s economy (with a sovereign currency) is the same as a household or small shop” nonsense of the national Tory press if it is to achieve real economic development.

Although there is more analysis in the supporting Richer Britain, Richer Lives report on Industrial Strategy, in neither that nor the NPF report is an actual preferred holistic economic model cited. As a potential example, the much more manufacturing-oriented sectoral mix and highly successful skills training/apprenticeship approach of the German economy could have been usefully looked at as a model to emulate. Instead discussion of this vital topic area just diverts into the more comfortable areas of environmental sustainability issues, research funding, and the skills agenda. These are important parts of, but NOT the core issues, of a comprehensive strategy for industrial and economic rebirth.

It is also a huge step forward to see a clear rejection of the bogus economics of Austerity in this early part of Labour’s slow journey from its fully neo-liberal last 30 years, in favour of a productive growth strategy with an increased role for the state. It is also excellent that a Labour economic policy report rejects the zero hour contract, casualised (überised), economic model, that New Labour fully embraced – alongside it’s, never openly voiced, but core, strategy of unlimited labour supply to restrain wage growth and trade union organisation, via the EU Single (labour) Market.

It is also a breath of political fresh air to see in a Labour economy document an acceptance that some, limited, nationalisation (particularly for the “natural monopolies”), and various co-operative forms, can be a real option in achieving the economic model which the UK needs to secure sustained (and sustainable) growth and prosperity for all.

The elephant in the room

On the hugely important issue of the UK financial sector, apart from the correct but superficially stated need for National and Regional Investment Banks, the report simply ignores this huge unbalanced, over-large financial sectoral elephant in the UK economic room. What is missing is an explanation of the ways this dangerously unregulated, irresponsibly speculative, essentially globally parasitic, sector, distorts and unbalances the economy. Equally absent is a countering strategic and structural game plan to reduce its relative size and economic/political influence on the rest of the economy and national policy priorities. Without that all the rather vague upbeat statements about “rebalancing” and “21st century industrial strategy” are pretty meaningless (and remarkably akin to very similar oft repeated Tory rhetoric).

Without a real effort to regulate, constrain and direct their financial sector funds to economically desirable investment priorities, within an overarching national economic plan, using selective nationalisation where necessary, the UK financial sector will continue to suck the lifeblood (and skilled people) out of the rest of the economy for speculation purposes. And vulture hedge funds will continue to destroy productive company after company in their short-termist drive for ever higher and quicker shareholder returns as an alternative to investment for the future. Labour so far is simply afraid to grasp, or even acknowledge, this core problem in our UK economy. As the various global and UK debt bubbles once again approach unsustainable 2008 Crash levels, not having a strategy to restructure, constrain, and control the irresponsible financial sector is very short-sighted.

Conclusion

Although the Economy, Business and Trade Annual Report is still seriously inadequate in terms of its lack of serious background data and analysis, and any clear sense of a long term route plan and future desired economic model, this document is undoubtedly a small but significant step forward supporting the leftward shift of our Party.

Editorial Note: All the backup papers for the 2017 Election Manifesto are available here.

30 Comments

  1. unless the economic strategy is in line with that of Maynard Keynes general theory we may not be able to get out of the mire left by the Tories, the economic situation faced in 45 was far worse than today.now there has to be public ownership on the lines of the Attlee government-first and foremost bringing back the Bank of England into public ownership.the economics of Keynes are hardly revolutionary ,

  2. JohnP says:

    Oops a typo in my section on National Debt. As can be clearly seen on the graph, the current 3% figure for National Debt interest relative to our GDP is in fact lower than any sustained period since 1916 , not just 1960. (Text updated – Ed)

    In fact the Bank of England recently made public historical documents showing that it engaged in completely secret money printing on a vast scale during WWI when a government bond issue failed. So the huge National debt figure of that period is actually despite a huge amount of extra decidedly “off balance sheet” early Quantitative Easing ! http://www.taxresearch.org.uk/Blog/2017/08/09/the-first-world-war-was-partly-paid-for-with-quantitative-easing/

  3. C MacMackin says:

    Thanks for the detailed analysis John. I have some misgivings about the proposed model for the investment bank and it looks like it will be used in a decidedly non-socialist way. In particular, I note that it won’t lend directly to businsess, instead just lending to existing banks. In this it is modelling itself off of Germany’s Kreditanstalt für Wiederaufbau (KfW).

    In Canada we have the fairly significant Business Development Bank of Canada (BDC). My father, who owns a medium-sized business (and is decidedly not a socialist), has been their customer for a number of years, so I asked him a bit about it. He confirmed that BDC does lend directly to business. Surprisingly, its interest rates are slightly higher than what you could get at a private bank. However, it lends to people that the private banks won’t (e.g. those at the start of their carreers) and gives more flexible terms on its loans. There is a significant network of branches, often right on the high street. Apparently it also offers advice to SMEs. According to my father, the private banks don’t like BDC much which he thinks probably indicates that it’s doing something right. He’s told me that he quite likes doing business with BDC and it’s one of the few examples of public enterprise he’s positive about. Would something like this be a better model for the UK than KfW?

    Like you I’m disappointed by the lack of emphasis on (indeed, a degree of hostility to) a national economic plan. This is particularly concerning regarding climate change, for which a national plan is urgently needed. (Ideally we’d see a global plan but we aren’t anywhere close to having the institutions for that.) The most successful decarbonisation in history was probably in France during the 70s and 80s, and it would not have been possible without “dirigisme”. Not to always bring things back to my home country, but one of the things which particularly impressed me about Niki Ashton’s environmental policies was her appreciation of this fact. She goes so far as to say that “Only the federal government that can implement such a plan of social, environmental, and economic justice.” Admittedly, this is in the context of a currently very decentralised country rather than an extremely centralised one like the UK, but she’s one of the few people these days you hear framing environmental politics in such terms.

    1. JohnP says:

      Yes, C.Mack, lack of space precluded examining the currently proposed model of National Investment bank/s – and as you say, funneling yet more cash aimed at industrial regeneration through an unreformed existing structure of commercial banks is a guaranteed recipe for failure.

      The entire underlying feel of this Report , and all the others, is a strong whiff of the underlying stench of fear of the writers that in trying to embrace the highly popular bullet point proposals of the Manifesto , Labour might be accused by the Daily Mail and Economist et al, of adopting “a Far Left , Marxist economic model” ! Which of course they will do anyway, for any, even mildly Keynsian joined-up, state-led economic development model that rejects Austerity and privatisation and neoliberalism and tax dodging in a coherent way.

      Today, as ideological civil war still rages in our Party, all the current NPF output reminds me somewhat of the dual personality inner conflicts of Gollum in Lord of the Rings ! The seductive power of the ” corrupt neoliberal Dark Lord ,Sauron ” is still alive and well in the PLP and Party Machine and local government ! Until the PLP and party machine stops “kissing the ring” of Big Business and neoliberalism , and adopts a radical Left Keynsian strategy based on comprehensive State-led planning and selective nationalisation pretty much NOTHING will be achieved from our Manifesto wish list by an incoming Labour government, in the face of the inevitable hostile market response.

  4. JohnP says:

    My thanks to David Pavett once again, for his useful suggestions, and not inconsiderable editing job, on this article.

  5. David Pavett says:

    Thanks John for your thoughtful analysis.

    I have a question. There is no mention in the report, I believe, of capital controls. Keynes was of the view that national economic planning was not possible without such controls. Labour governments after WWII were openly committed to such controls. Do you think Keynesian policies can be implemented without them?

    1. JohnP says:

      No I don’t , David. Keynes was correct. Any serious Left reforming Labour government would have to have a variety of capital control measures in its economic “toolkit” – to respond to the absolutely inevitable hostile response of the markets and rich individuals and corporations to an even mildly redistributive economic policy agenda.

      Capital controls are of course completely forbidden by one of the core “Four Freedoms” of the EU/Single Market. The Greek Syriza government had to stand passively by as the Greek oligarchs simply shipped their entire (often corruptly acquired, untaxed) wealth out of the country in 2015, en route often to the London property market and money laundering banking sector.

      1. C MacMackin says:

        It doesn’t take away from your main point, but much of the capital flight in Greece had happened long before Syriza got into power. We’ve also seen capital controls applied in Eurozone countries Greece and Cyprus, although only after the collapse of the banking sector and only ever meant as temporary measures. I suspect the EU would be far more hostile towards permanent capital controls coming from a reforming left-wing government.

  6. Danny Nicol says:

    Much thanks John.

    A few comments.

    1. The topsy turvey nature of the Report being led by the Manifesto reflects that power is still in the hands of the leadership despite its being a left leadership. In other words there has been no increase in intra party democracy. The left leadership did not pester for more democracy in the way Blair as leader nagged for the mutilation of Clause IV(4).

    2. The contempt for “old fashioned” economic planning (funny how that insult is reserved by Labour folk for socialism never for neoliberalism) and the nationalisation needed to enforce it, reflects the ongoing domination of liberalism. The assumption is that the country’s interests are best served by keeping the system of private enterprise largely intact and the super-rich in charge.

    3. Welcome contempt for TTIP and CETA should logically be matched by contempt for the EU Treaties. All aim to ensure corporate domination.

    4. The banking crisis of 2008 should have led to the nationalisation of the vast bulk of the UK banking and financial sector becoming a central demand of the Left. Banking needs to be in the public sector and if not a state monopoly at least the nationalised sector should be entirely dominant. The catastrophe of the subprime crisis showed that the sector cannot safely be allowed to remain in private hands.

  7. JohnP says:

    It’s quite true that the Greek rich had been emptying their bank accounts and sending it abroad long before the Syriza government, but the Syriza government never got to grips with the continued capital flight either, and neither did the Cypriat government. Imposing capital controls AFTER the banks are empty and the economy is in ruins is pointless !

    Of course , within the straightjacket of the Euro , individual EU state governments have nothing like the sovereignty that a UK Left government would have to impose a range of capital controls, and support the £ , or indeed ldt it depreciate if required. Unfortunately At present there is no evidence The NPF , or The Corbyn team, have even thought seriously about the inevitable hostile response of the markets on a new Labour Government’s room to manoeuvre !

    1. C MacMackin says:

      Agreed, imposing capital controls should have been the first thing Syriza did after getting into office. By the time they did put them in place they were closing the gate after the horse had bolted.

      Could you give more details about how the government could fight a run on the pound? Clearly this is something which would need to be done, but I don’t know enough economics to be familiar with what the concrete steps would be.

      1. JohnP says:

        Thanks for asking this vital question, C.Mack. I can not do better myself than provide a direct excerpt from the excellent “Alternative Economic and Political Strategy for 21stCentury Britain” document produced by, amongst others, Andrew Murray and Seamus Milne, a few years ago (for the CPB).

        In Chapter 2, “Regulating the Casino” , the strategy states :

        “Any government committed to a growth strategy and stimulating domestic investment would need to quickly put in place a range of measures to prevent the outflow of capital. In part this could be achieved by measures to alter the behaviour of pension funds for example. In addition, a progressive government could face disruptive activity from City interests, probably even in advance of any election victory. These could include capital flight which could trigger a run on sterling and raise interest rates, increasing the cost of government borrowing and accelerating the likely flight from government bonds, raising the threat of a sovereign debt crisis. A progressive government would need to be ready to meet this challenge with a package of pre-emptive measures to control the outflow of capital.

        A progressive government could take a range of measures to control capital flows.
        The most well known is the Financial Transactions Tax. A progressive government could implement a Tobin Tax – a small percentage tax on foreign exchange transactions – sometimes referred to as a ` Robin Hood tax’ . As well as raising much-needed revenue to fund government investment in the economy, a small tax on each speculative purchase of currencies was advocated by Nobel Prize winning economist James Tobin, precisely to ` put some sand’ in the wheels of international financial markets, recognizing as he did the damage that such speculative activity can cause to the real economy.

        It would also be important to control the flow of capital out of the country in the form of portfolio investment by financial intermediaries acting on behalf of institutional investors like pension funds and insurance firms. This could be tackled by a prohibition on all future such outflows, along with the phased repatriation of a percentage of existing portfolio investment, which would then be sold to the Bank of England, boosting sterling reserves. The government could also impose a tax on new cross-border trading in securities, removing the incentives to channel working people’s savings into overseas securities markets. Instead, these could be channelled into government bonds for infrastructure investment.

        Finally, there would have to be measures to restrict the release and use of sterling and foreign currency held in British banks, to prevent overseas investors selling their holdings of foreign exchange and British residents moving their money out quickly. This would mean the government moving to legally separate commercial and investment accounts of overseas depositors holding both sterling and foreign exchange in British banks. The government could then establish a dual exchange rate by which anyone seeking to sell foreign exchange for trade purposes could do so in a regulated commercial market at a fixed exchange rate, while investors simply wishing to move their investments into another currency would only have access to a limited supply of foreign exchange and the exchange rate would float according to the demand, effectively making capital flight more expensive.

        Taken together, these policies would represent a major challenge to the City of London’ s self-appointed role in the UK and international economy. However, the alternative is to continue allowing the British people to act as the lender of last resort for a failed banking sector, submit to attempts to blackmail the government of the day with the threat to relocate, endorse the continued under-funding of productive activity and the ever more ingenious direction of funds into fuelling new asset bubbles and embrace a policy agenda that will drive us headlong toward another perhaps greater collapse.”

        Presumably Murray and Milne (and Fisher) must chew the carpet privately in frustration at the utter inadequacy of the current NPF Report content !

  8. Peter Rowlands says:

    Thanks for a very good analysis. I particularly support your comments on banking, where the manifesto is disappointing and doesn’t go beyond the 2015 manifesto where these ideas ( National Investment and regional banks) were first laid out. The manifesto talks about breaking up RBS, but is silent on yhe other two huge banks, HSBC and Barclays, bothof whom are ‘too big to fail’, and must be dismembered if the strategy we need has any chance of success. There is every case for much greater regulation and control of banking, including their prime role in precipitating the 2007-8 crisis and their criminal activities before and since, ( Manipulating Libor etc.), but Labour has not given this the attention it deserves.

    1. C MacMackin says:

      As I’ve argued before, I don’t think breaking up the big banks is a solution. (See, for example, this interview.) For one, big banks are required in a globalised economy in order to leverage sufficiently large enough amounts of money. Even in a non-globalised economy this is somewhat true. This proposal also gives the false idea that everything would be fine if only we had a properly competitive market of smaller players. I know you support it so that there are no banks presenting systemic risk, but I still think the policy inadvertently feeds into that narrative. We on the Left should be arguing for planning (including at a national level) rather than more competition.

      Instead we should be arguing for nationalising the important banks and insurance companies (as was proposed a few years ago in an excellent pamphlet by the FBU). This would give much more capacity for directing an industrial strategy, as the government would then be able to direct lending to private business. It could be used to break a capital strike, by having public banks lend directly to public enterprises and to overcome an attack on the bond rating by lending directly to government. It also help to promote the idea of public ownership and democratic control, as opposed to the idea that our problem is simply an insufficiently competitive market.

      Yes, of course this would be controversial and difficult, but we should not underestimate how difficult it would be to pass legislation breaking up big banks. They would fight it every step of the way and probably try to use economic sabotage to stop it. This would quite possibly continue even after the legislation were enacted. I also realise that most of the party (let alone the public) are not yet at the point of supporting nationalisation. However, what is the point of the Left if not to argue for radical policy? Furthermore, arguing for radical measures opens space for the leadership to adopt less radical policy which would nonetheless be challenged by the right-wing of the party. Who knows, it could even scare the banks into submitting to regulation and break-up.

      1. JohnP says:

        I think you are correct strategically, C.Mack, but tactically, nationalising (and I mean actually putting them under firm state control – so as to assist seamlessly with a comprehensive national Plan) the key banks would ,or will, involve a major direct confrontation with UK and global Big Capital, with the gloves truly OFF ! I think this is too much to expect to see in a currently structured Labour Party “policy bundle”… ever .

        However, at that absolutely inevitable “2015 Greek Syriza-style moment crossroads” – that will face a Corbyn government trying to implement even the mildly Left Keynsian policies in our 2017 Manifesto, to push forward Leftwards (rather than Corbyn becoming yet another defeated Alex Tsipras-style collaborator administering unending Austerity) ,would indeed definitely require ever greater government control of those key “Commanding Heights” – particularly the banks.

      2. Peter Rowlands says:

        I think we would both agree that there should be no privately owned big banks, but the problems of nationalising the whole sector would I think be greater than breaking up the banks,which links to the manifesto commitment to separate retail and investment banking.I think that doing this to guard against the possibility of another huge bailout following another crash would be very popular, and I hope it will be developed.

      3. C MacMackin says:

        I have no expectation that Labour, in its current form, would be able to see through such a nationalisation. However, I also don’t expect it to adopt this policy. My point is that we on the left should be making the argument for nationalisation so that 1) we give the leadership more room to manouver and 2) party members will be familiar with the idea when it becomes necessary to pursue it. We can’t expect members (let alone the public) to suddenly latch on to these ideas in a time of crisis if they have never heard of them before.

        1. JohnP says:

          Indeed we should, Chris. We musn’t minimise the sheer scale of the educational task socialists face however. I was much surprised , and not a little depressed, by the , now abandoned, Momentum MXV online discussion forum . Hardly anyone was even interested in my proposal for a Comprehensive Left Economic Strategy, or the issue of nationalisation. This from the supposed “(Far)Left ginger group” within Labour !

          The topics which were popular were generally firmly within the ideological sphere of Left liberalism and its sub component, identity politics. Thirty years of relentless neoliberal propaganda have done a real job on the “mindspace” of even the self-identifying “Left” – such as to leave the Labour Left ill equipped to construct effective policies to counter the hugely dominant neoliberal narrative .

          The emphasis in current Labour thinking on things like local energy supply municipal companies, and worker’s co-ops ; seen as being equally radical in potential to outright nationalisation and comprehensive national planning and joined-up national provision progressing a Left agenda, are symbolic of the depth of Left liberal ideology on the Left.

          Let’s be clear, municipal localism and workers co-ops are NO large scale solution to the power of globalised capitalism at all , regardless of their potential in limited cases . Localism , regionalism, city regions, and co-ops (trapped within the competitive dynamic of the market) are all trendy things globalised monopoly capitalism can easily live with – and crush when desired.

          But we are where we are, with a UK Left generally very ignorant about socialist strategies , the key distinctions between socialism and capitalism, and our own Labour Movement and socialist history. That in itself is a key triumph of the 30 year ideological dominance of neoliberalism.

  9. C MacMackin says:

    I thought I’d mention an idea I’ve had bouncing around in my head to see what people on here think of it. It would be more appropriate to go under Work, Pensions, and Equalities, but I don’t know if we’ll be getting a response to that report so I’ll just put it here.

    While the UK has the state pension, it surprisingly does not have a public pension which is linked to income. Examples of such systems in other countries are the Canada Pension Plan (CPP) and Social Security in the US. Even in those countries, such systems are insufficient and people rely on employers and private savings for most of their retirement. As such we see a lot of variation in pension plan quality across employers. Pensions are continuously under attack in contract negotiations, suffer if the stock market is doing badly, and have been lost due to corporate malfeasance.

    Would it be feasible to create a universal income-scaled (up to some limit) public pension which could replace employment-based pension funds? I’ve heard such things suggested before in Canada. I’m imagining this would be achieved by nationalising existing pension plans. Stocks in strategic companies and infrastructure would enter permanent government ownership. Most others would be sold as a pay-as-you-go model is adopted. This would be funded by contributions from employees (similar to NI contributions), employers, and government. There would be no upper limit on employee/employer contributions even though there would be on payout (reforming Social Security to work this way is one suggestion of how to solve any problems of sustainability).

    This would mean that employers could no longer seek concessions in pensions at the bargaining table and would make pensions more secure. Where necessary, some the national pension fund could use investments to help cover its costs. However, these could mostly take the form of government bonds. CPP used to be used this way to finance projects and Social Security is still one of the largest holders of US sovereign debt. Having such a source of loans in this country could be very useful as a way to fund capital spending and to weather an attack on the bond rating.

    I don’t know very much about pensions, so there might be something obvious here I’m missing. I’d be interested to hear feedback.

    1. JohnP says:

      What you are describing sounds like the excellent UK “SERPS” (State Earnings-Related Pension Scheme) which ran from 1978 to 2002. To quote Wikipedia , https://en.wikipedia.org/wiki/State_Earnings-Related_Pension_Scheme

      “The purpose of the scheme was to provide a pension related to earnings, in addition to the basic state pension.

      The principle was that everyone would receive a SERPS pension of 25 per cent of their earnings above a “lower earning limit” (approximating to the amount of the basic state pension). The scheme was phased in over twenty years so that those retiring before 1998 received a SERPS pension proportional to the number of years that they had made contributions to it. There was an “upper earning limit” of about seven times the lower earning limit, beyond which earnings were disregarded for NI contributions and calculation of SERPS pensions.

      Under the Social Security Act 1986 the target SERPS pension was reduced from twenty five to twenty per cent of average earnings between the two limits. Pensions earned before 6 April 1988 were not reduced and the change was to be phased in for people retiring between 1999 and 2009. ”

      I think the reason for abandoning this excellent scheme was the Thatcherite motive to direct people into (what turned out to be disastrous) private pension schemes.

      The Thatcherite originating UK pensions disaster just keeps on rolling, with much of the motivation for the rise of the huge new private petty landlord class being related to the failure of private pensions to guarantee future income. And of course George Osborne’s recent changes which allows people to take their pension cash out early is another guaranteed future disaster for people in impoverished old age.

      All pension provision for ordinary people should be funded by the state out of current taxation. The vagaries of the capitalist market is no basis for long term guaranteed pension provision . Those on high incomes who want to derive pension income from speculative market investment should be able to do so – but lose the ludicrous tax advantages currently in play. A Left government could use taxation incentives (and penalties) to reward pension fund investment in UK-based infrastructure projects fitting in with a National Regeneration Plan – short of nationalising the private pension funds .

      1. JohnP says:

        I should have said “All pension provision for ordinary people should be funded out of current taxation AND ONGOING PENSION CONTRIBUTUIONS” . Pay as you go state pensions schemes like the one for teachers has always been in surplus, without any need for investment in the capitalist casino market place.

        There is more sense however in recent innovative ideas to directly link state-run pension funds to hard infrastructure projects like council house building – given the guaranteed long term income stream, and high social benefit derived.

    2. C MacMackin says:

      Yes, SERPS sounds exactly like what I’m talking about, except that I’m proposing larger payouts. I think you’re right on the reason for abandoning it. When CPP was created the original plan was to have it pay 50% of income, but the finance industry objected and got it down to 25% (recently increased to 37.5%—at least Trudeau has done a few good things). Bringing something like SERPS back, especially with 50%+ payouts, would be very useful in these days of insecure “gig economy” jobs without pension plans. While perhaps a maximalist approach, I suggested nationalising existing pension funds in order to provide a solid base on which to start the new SERPS (meaning it wouldn’t require such a long phase-in period) and because this would be a relatively easy way to get public control over a large amount of funds. Pension plans often own important pieces of infrastructure. However, no one really owns the pension fund so it could be nationalised without having to pay compensation, other than continuing to respect pension obligations. It would also give direct control over massive amounts of capital, which could then be used democratically. While no doubt finance would object to this policy, it would still be considerably easier than, say, nationalising the banks, while offering some of the same benefits.

      1. Peter Rowlands says:

        Given the major upheavals there have been recently in introducing a new pension scheme and the requirement to enrol most employees in pension schemes, I don’t think we should envisage another major change at this point. SERPS was intended as a supplement for those not in occupational schemes, and was continued after 2002 as the state second pension.
        However, what you’re saying is that there should be decent pensions paid on the basis of a national formula which employers cannot use as bargaining tools, as recently with Tata Steel, where workers understandably accepted a deterioration in pensions in exchange for guarantees on job security. You are quite right, but it is a question of how this is best achieved, without letting employers off the hook.Part of the problem is that so many defined benefit schemes have been replaced by those based purely on the stock market, and that must be reversed. Yes, pension funds are a potent source of finance for the sort of investment that we would wish to make, but we do not in our current manifesto envisage the use of the huge public sector funds for this purpose, and we should.

        1. C MacMackin says:

          I’m not proposing to let employers off the hook. They would be required to make contributions to any new SERPS. In the case of Canada Pension Plan, the employer and employee pay equal contributions. I was actually misinformed—it turns out that the government doesn’t pay into it. (Turns out I was also wrong about the new payout levels, which will be 33% of income rather than 37.5%). In this regard it behaves just like private pension plans, except it is outside of the control of employers. It also has the benefit that it is fully portable across employers, which is useful given that people no longer work for the same company their entire life.

          I agree that enrollment could be a hassle, but surely it could be managed without too much difficulty using National Insurance numbers. The argument that there wasn’t already a recent shakeup of pensions doesn’t hold water for me. That logic could equally be applied to say that because the NHS just went through a disruptive reform we shouldn’t renationalise it. The point is to fix what is wrong, regardless of when the problem was created. I’m open to debate whether a new SERPS should be a priority or is necessarily the best approach to the problem (although I’m inclined to think it is), but let’s do that based on its merits.

          1. C MacMackin says:

            Sorry, that should read “The argument that there was a recent shakeup of pensions doesn’t hold water for me.”

          2. Peter Rowlands says:

            I have no doubt about the desirability of a comprehensive state second pension scheme which renders pensions secure, non negotiable and a potential source of state investment.However, I doubt, for reasons I’ve given, whether this should be a priority, and it doesn’t feature in the manifesto.One of the immediate problems would be how to deal with the deficits that most company schemes are in.Companies have an obligation here.
            I do not accept the NHS analogy.This commitment is essential if we are to preserve the NHS as a public service.
            A further point is that while decent occupational pensions are needed they don’t solve all the problems of providing everyone with a decent income, which explains the interest recently in UBI. I don’t think this is an immediate solution, but its coverage would be more comprehensive than a new SP2.

          3. C MacMackin says:

            I wasn’t meaning to imply that these sorts of pension reforms are as important as renationalising the NHS, which should be one of the first priorities of a Labour government. Rather, I was pointing out that I don’t think how recently things have last been altered is, by itself, a good argument for or against further change.

            I take your point about companies not living up to their obligation to fund pensions. However, how do you propose to solve that? You could force them to pay in enough to fix the deficit I suppose, although this could also be used as a precursor step before nationalising pension funds. If a company genuinely can’t afford to fix it, then what? Making pensions the first priority in bankruptcy proceedings would certainly be helpful, but it still doesn’t guarantee that workers will receive their full pension. Similarly, how do you propose to reverse the trend away from defined benefit and towards defined contribution? You seemed to imply some sort of national formula could be used, which I suppose would be analogous to Germany’s workplace-based health insurance, as opposed to the NHS (which is more analogous to having a single national pension fund). I’m not convinced that will be any easier to achieve, I suspect it would be more susceptible to fraud, and it doesn’t give the public control over investment that would come with a national pension scheme. I think a big, bold, easy-to-understand policy like this would also be easier to get people excited about (and get them to defend, once implemented) than more technocratic fiddling with pension regulations.

            No, comprehensive pensions don’t provide everyone with a decent income due to unemployment, past and future. However, I don’t think a UBI is the solution to that, now or ever. The reasons why would be an article in itself, but for a decent discussion see here. In short, for a UBI to actually provide a decent standard of living would be intolerable to capital because it would mean there was no longer pressure on workers to participate in the labour market. It would antagonise business nearly as much as mass nationalisation, without having the benefit of giving public control over the economy. There are also more technical issues around how you could effectively structure taxation to pay for it and how to ensure it really can cover people’s varying needs without becoming just as bureaucratic as the existing welfare state. I think it is better to fight for full employment, comprehensive pensions, and more generous benefits to catch anyone the above misses.

            While policy being related to points in the manifesto might make it easier to bring up, I don’t think we should be limited to policy areas covered by the manifesto. I still want to see the left demanding we cancel Trident renewal and reverse benefit cuts, for example, despite both of those things actually going against what was in the manifesto.

            All of this said, I don’t plan to devote too much effort to something like this. I think it would be a useful policy for reasons I outline, but I don’t have the time. I mostly focus on hectoring people about energy and climate (because someone has to) and trying/failing to figure out how we get all of the non-socialist Corbyn supporters to become socialists.

          4. JohnP says:

            Universal Basic Income(UBI) is quite simply yet another example of the toxic intrusion of neoliberal ideology into the self identifying ,liberal, “Left’s” mindscape during the long 30 year night of neoliberal hegemony.

            UBI/Citizens Income (originally “Social Credit” in the 1930’s , with distinctly anti semitic “anti usury” and neo fascist underrpinnings) is today a “bleed over” from the most extreme libertarian individualist , “shrink the state, minimise taxation” wing of neoliberalism .. even in its Leftish variant it still panders to the neoliberal core concept of the citizen being merely an isolated, classless, individual benefit deriving consumer in a capitalist marketplace. The profound inequalities of wealth and power behind the operations of the market are ignored. Instead everyone (regardless of personal wealth) just gets an annual survival ration, and must “rationally” use that to buy healthcare and other social goods from the competitive marketplace. The logic, and neoliberal purpose, of the UBI ideology is to completely abolish all universal NHS type provision, and pin the “blame” for individual poverty and non access to private health care on the “bad choices” of the individual.

            As the Greens found during the 2015 General Election, their (supposedly “Leftish”) variant of UBI was thoroughly destroyed by close examination by the mass media – and rightly so, the sums didn’t add up – and the poorest in society would be worse off !

            Socialists have a genuine, well understood, massively popular, alternative to Citizen’s Income to fight for – it is a humane, generous Welfare State, paid for out of taxation , and available to all on the basis of NEED.

            That so many people on the Left (and apparently even John McDonnell) still have illusions about UBI , this pernicious , unworkable, bleed-over from neoliberalism at its most viciously individualist, shows just how degraded the values and analysis of traditional democratic mass action based socialism is in the UK today.

  10. JohnP says:

    It is once again deeply disappointing that on this article on the vital area of the UK economy , and likewise Chris’s on the Environment, Transport and Energy, and David’s on International Policy, only a tiny number of people have felt willing, or perhaps able (?) to comment or contribute.

    Where in particular are the responses from the “Labour Left” comrades who serve on these Policy Commissions ? One thing is clear, politics abhors a policy vacuum. So if the Left refuses to put the work in on policy development or discussion on these issues, the pre-existing neoliberal Labour policy bundle will continue to dominate our Party – regardless of the popular Left leaning 2017 Manifesto .

    Without well researched, joined-up , detail policy implementation “meat” on the feel-good outline policy proposal bones of our Manifesto, a future Corbyn government would be driven back to Austerity implementing neoliberal orthodoxy very, very, quickly, just as the radical left promises of Syriza were crushed by the markets within a few months in Greece.

  11. Peter Rowlands says:

    Chris. I have already said that a national scheme which employers cannot abuse is a desirable goal, but it is not an absolute priority, as you agree, and it would be necessary to bring schemes into balance before that was undertaken, as most of them are in deficit, due to the irritating habit of employees living longer, as well as the abuse of schemes by the likes of Maxwell. Green and others. The Pensions Protection Fund does what it says,and is funded by a levy on firms, but future pensioners will not necessarily receive all that they would have done. However there is obviously room for much greater legal stringency to prevent the wanton abuse of funds. In Green’s case, while he eventually agreed to pay up, it is not clear that he could have been forced to do so.
    On UBI there is a possible misunderstanding. I am not in favour of UBI, and I broadly agree with what you and JohnP have said about it, I was however making the point that interest in it has risen because of income inadequacy and insecurity. Ironically the original Compass article by Reed and Lansley, ( UBI, an idea whose time has come) set aout a very good argument as to why such a scheme was NOT viable, but then suggested that a partial scheme could be used as a bridge to a full scheme.This struck me as nonsensical, in that by definition UBI is comprehensive, and the full scheme , when reached, would prove as unviable as they had originally said an initial full scheme would be.

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