Sunday, February 8, 2015

Cameron versus Milliband: why business hates (and fears) Labour

In the last week or so, we have seen a barrage of media stories about how Labour is "anti-business" and has few supporters from big business. The example of the head of Boots - who lives abroad for tax reasons - was emblematic.

The other side of the coin is simply that business is anti-Labour. This can be starkly demonstrated by David Cameron's piece in the Telegraph, which was a wonderful example of seeing his world-view, such as it is.

Cameron's piece was a snapshot also of his personality in some ways (more on that here), and how he sees Labour as representing "chaos" compared to the order and competence of his government. When reading this article, it's difficult to see if this is plain electioneering garbage or if Cameron genuinely believes in what he says (the latter would be almost more worrying, though).

A statement of intent (or willful self-delusion)

Why is the main thrust of such garbage? Let's look at some examples.

Cameron says "Ours is a nation that is the best place to do business  ", which translates as really meaning, "ours is a nation that is the best place for foreign companies to make lots of money by having a badly-paid workforce with poor union representation and avoiding paying tax through helpfully-complex tax arrangements" In other words, under Cameron, the UK is a developed country whose economy is technically thriving, but whose economic model really resembles a third world country. The jobs which have been created are mostly low-paid, many of the paid so little they don't even qualify to pay income tax.
This is why the government's debt is still increasing in spite of the appearance of an economic recovery: the money being generated is literally going in the wrong direction - into the foreign (tax free) bank accounts of all the businesses that Cameron and the Conservatives and not into the government's coffers. The government's tax receipts are down massively for this reason, but those in government seem to think that their plan is working. Well, if their plan was to massively reduce the government's money coming in while at the same time reducing government spending, then it's worked perfectly!

Cameron also says the UK under his government is "A nation where we have the businesses paying the taxes we need, so we can cut people’s taxes "; a statement so plainly disingenuous to be laughable. As we have seen, the sadistic drive that the government has to reduce spending on benefits may have clawed back a small amount of money, but the amount the government loses each year through businesses avoiding tax dwarfs any money lost on paying "too much" on benefits by an enormous margin. But as we have seen, because the Conservatives are the "friends of business", this means turning a blind eye to blatantly deceptive and immoral practices that deny the government many billions each year. In reality, this attitude is simply financially self-defeating, as we are now seeing from the lack of money coming in in tax receipts to the treasury. This economic "blind spot" marks the Conservatives as having a plan that not only useless, but also idiotic. The people whose taxes he is cutting (or helping to avoid entirely) are the same businesses that are creating a working regime of zero-hour contracts, and insecure, poorly-paid jobs. This is the "Cameron Economy", where the real winners are the ones who don't pay tax.

How can a government properly function if it is not serious about collecting tax?

Creating a false narrative

The government's explanation for why the economic crisis happened is also - to put it politely - novel. Another way of describing the Conservatives' explanation for the financial crisis is "complete garbage".
Listen to government ministers on BBC's Question Time (Sajid Javid, the government's culture minister, for example), and they tell you that they are being responsible and paying down the debt left behind by Labour overspending. This is an interesting statement, but happens to be total nonsense.

Yes, when Labour left office there was a massive government debt, but that debt was not created by massive, irresponsible government spending.
As everyone may remember, there was an international financial crisis that was caused by massively irresponsible and amoral behavior by banks. The USA and the UK were especially-vulnerable precisely because successive Labour and Conservative governments had centred their economic model on financial markets, at the expense of the wider economy. When the banks crashed, the government bailed out the banks by taking on the trillions of debt - so that debt suddenly became the government's debt. The "austerity" that exists in the UK is the government (i.e. the taxpayer) paying-off the debt that was caused by the banks. Why on earth the taxpayer should pay for the banks' idiocy is another question, and the ultimate "con" that people have been buying for five years. But that's the first reason for the debt.
The second reason is that when the world economy collapsed, as the UK's did, unemployment shot up and consumer spending shriveled. These two things caused a large reduction in the government's tax receipts, which accounted for the government's debt going up i.e. when your spending stays the same, and your revenue goes down, you get a debt. As a result, Labour borrowed more to pay for this. In a different way, George Osborne - who is really running the show - is experiencing this truth now with the recovery that doesn't actually give any extra money to the government.

This false narrative explains why the Conservatives need people to believe that the financial crisis was somehow Labour's fault, when really the government had very little to do with the problem. If anything, it was government's lack of control of the financial industry and the regime of no rules that caused the problem. This was the regime that the Conservatives have always supported - the same regime that caused the financial crisis.

This also explains why Labour are being targeted now by business. Having made lots of money by encouraging the government to create a "light-touch" tax regime and labour market - the very same thinking in the financial industry that caused the crisis - these business leaders are terrified of the thought that they might have to actually play by the rules if Labour return to government. This is the reality.

What Labour propose is nothing terrifying or chaotic as Cameron says in his article: it is simply wanting business to play by the rules and pay their taxes transparently like a responsible part of society. But that's the problem: many people in business treat society as something to be abused, be it the tax system or their workforce. The neo-liberal economic orthodoxy of the past thirty-five years has been responsible for turning the UK now into a pseudo-developing country, at least in terms of how it is run.
Because people are accepting the false narrative and false choice about there being "no alternative" to austerity, this is why business leaders and Conservative ministers are able to turn the UK economy into a race to the bottom. There are other alternatives, and it's only by blowing the false narrative can the UK economy change tack. People must not be awed by business into thinking whatever is good for them, is also good for the country. The evidence - and the government tax receipts - suggest otherwise.

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