Wednesday, 2 August 2017

A Green Alternative after Brexit

It was after viewing Paul Mason's "Why it's kicking off everywhere" (Young Vic production broadcast on BBC 2), that I realised why I have become so disillusioned by Green Party and other so-called left wing leaders in recent years.

I remember well the pride I felt as a member of the Green Party, at its support for the newly elected Syriza government in Greece in 2015 and Syriza's fight with the EU over austerity. The shenanigans of Goldman Sachs had been exposed, including its masking of Greece's debt by cross currency swaps, facilitated that country's ill fated adoption of the Euro in 2001.
(Although the EU have never punished Goldman Sachs for this deception, indeed many Eurocrats go on to careers at GS, including the former president of the EU Commission, José Manuel Barosso).
But, as Paul Mason shows in his excellent play, the EU beat the Greeks into submission by closing their banks and threatening them with starvation. Which is why I find the current Green Party leadership's uncritical attitude towards the EU and its "statist oligarchy" (Simon Jenkins) a complete mystery. The Greens exist to promote localism and the devolution of power, yet they refuse to challenge an EU that is about the centralising of power.

A left wing environmentalist and anti-capitalist political movement would surely welcome the UK leaving the EU and striking out on its own? Not to follow the Tory line and negotiate ridiculous trade deals, the dangers of which were laid bare in the debate over TTIP, only then to be meekly accepted by the EU in their Canadian Free Trade deal, CETA. Dangers which would undermine environmental standards (such as imports of chlorinated chickens from the USA) and leave democratically elected governments open to be sued by corporate interests in kangaroo courts (CETA rebranded the politically untenable investor-state dispute settlement system (ISDS) as an “Investment Court System” (ICS)).

Our oldest trade deal, the EU Single market was established in 1992, but has singularly failed to improve our economic position in the world. UK goods exports to the 11 fellow founding members of the Single Market grew over the years 1993-2015 at a compound annual growth rate (CAGR) of just 1.0 per cent. This compares unfavourably with the mean growth rate of the goods exports of Canada, Japan, Singapore and the US and 10 other non-member countries trading with the same 11 founding members under WTO rules, who had a CAGR of 1.93 per cent, which is almost twice as high. It also compares unfavourably with UK goods exports to the 111 countries with which it trades under WTO rules. These have grown over the same 23 years nearly three times faster, at a CAGR of 2.88 per cent. (Source: Michael Burrage, Senior Research Fellow at Civitas).

No, what is needed is a form of the ‘Progressive Protectionism’ proposed by environmentalist Colin Hines in his e-book, ‘Progressive Protectionism – taking back control’. This would involve the UK introducing a set of interrelated and self-reinforcing policy priorities:
. Replacing international trade competition and export dependence with protective safeguards to ensure revitalised local and national economies. These will include the reintroduction of tariffs, quotas, capital controls and the ability to strengthen constraints on the numbers and pace of immigration. Hines describes this as the fundamental "mind wrench" that will do most to curb the present power of big business to play countries off against each other and to threaten to relocate unless countries bow the knee to open borders and global competition.
. Introduce a site-here-to-sell-here policy for manufacturing and services domestically or regionally;
. Control and localise finance such that the majority stays within the UK;
. Control the numbers, rate and ability of new immigrants to stay and work temporarily or permanently;
. Reinforce a minimum wage and outlaw zero hours contracts to stop undermining living standards;
. Introduce fairer and socially positive taxes and resource and pollution taxes and tackle aggressive tax dodging nationally and globally in order to fund social and environmental improvements and help pay for the transition to permanent, sustainable and flourishing local economies. For instance, all businesses that traded in the UK would have to pay corporate taxes in the UK and not be allowed to export profits by imports of over-priced services and goods;
. Increase democratic involvement both politically and economically to ensure the effectiveness and equity of the movement to more diverse local economies;
. Implement a local competition policy to eliminate monopolies, or if inevitable, like in the water industry, to bring them back into Government control, by nationalisation.
. Indeed to renationalise industries, such as the railways, where privatisation has singularly failed.

Although Hines argues this approach on an EU wide basis, the neo-liberal consensus in the EU (directed as usual by Goldman Sachs and other lobbyists) would never allow it. Indeed the strategic plan for the EU, as described in the ‘Five Presidents’ Report’, talked about 'a deepening of the Single Market'.
On 22 June 2015, the Commission described what new powers it wants when it published a key report: ‘Completing Europe’s Economic and Monetary Union’. Dubbed the ‘Five Presidents’ Report’, this document commits the EU to the creation of a ‘genuine Economic Union’, a ‘Financial Union’, a ‘Fiscal Union’ and a ‘Political Union’ by 2025.

However, it could work at a UK level after Brexit, if we were willing to reign in the power of the multi-national corporations and take back our own economy. The UK's massive trade deficit (£70 billion p.a. on average with the EU alone), is not sustainable, even in the short term, as the UK economy goes further and further into debt to fund our massive net import bill. These figures also do not take into account the money sent back by the millions of EU citizens working in the UK. Often a source of cheap labour to undermine wage levels in the UK and negate the UK's need to train its own citizens. Don't believe the lies being told about full employment in the UK. In reality, about 21.5% of British workers are either officially unemployed, inactive, or employed part-time even though they really want full-time work (see http://www.businessinsider.fr/uk/unemployment-in-the-uk-is-now-so-low-its-in-danger-of-exposing-the-lie-used-to-create-the-numbers-2017-7/).
We would need to shift economic policy away from "open markets". In place of that discredited system of global economic governance, the UK would take back control of the scale of capital, goods, services and people entering and leaving our country.

More importantly, it would allow the UK to take the drastic action needed to control pollution and lead the fight against climate change, by being an example for the rest of the world to follow.
One of the greatest criticisms of the position of the Green Party leadership over Europe is that they seem to have forgotten our basic message of replacing a pro-growth consumer society with a society wedded to conserving our environment. We have been told many times that if the world wishes to avoid exceeding the 2°C, then the wealthiest countries have to adopt a de-growth strategy for a limited period. This involves a move away from consumerism and towards social awareness. Replacing fast food and German cars with investment in the NHS, social care and local production.

The goal, as described by Hines, is to allow an economy to rediversify and prosper by maximising local economic activity. Domestic businesses and funding sources would then meet the needs of the majority in society. For instance by Government supported local investment schemes, perhaps by switching Quantitative Easing away from bonds (which just makes the rich richer) and into medium term infrastructure investment.

Or the Green Housing scheme that the then Green Party leader Natalie Bennett singularly managed to fail to explain during the 2015 election campaign. This involves spending seed corn money to build and rent out social housing, then using the rent revenues to facilitate further house building. This and other social investments would help to reduce inequalities and power imbalances, improve social welfare and job security and protect the environment. We could take back power generation by local investment in solar and wind electricity generators, which would also avoid the waste of transmitting power over hundreds of miles (50% of electricity is lost in transmitting it over power lines). It would also bury forever the arguments for allowing foreign interests to build new and ridiculously expensive nuclear power stations.

Across the world people are fighting to be more independent, not less so. They crave democracy and accountability; want to see their identities and cultures live on. The European Union is not new and it is not progressive, "its trail winding back to the Roman Empire" (John King). Britain needs to look to a radically alternative future, in the interests of its citizens and as an example of an alternative economic system for the rest of the world to follow.

Tuesday, 28 February 2017

Proposals for Tax Reform after Brexit: VAT

This is the first of a series of proposals from me, to enhance the UK after Brexit. It is NOT Green Party policy, but I would like it to be!
Value Added Tax (VAT) in the UK is a tax on spending with numerous exceptions, which makes it a complicated system.
There is a strong argument for reform of VAT after Brexit, in particular in relation to imports. Currently VAT is charged on some, but by no means on all, imports. However, the VAT charged on imports can be set off against VAT charged on subsequent sales, i.e. it is fully recoverable if you are VAT registered.
After leaving the single market, the UK will be free from EU VAT regulations. My proposal consists of three stages:
1. Reduce the VAT rate to 15% from the current high level of 20%, which would reduce the cost of all purchases, both imported AND UK produced, by about 4%.
2. Put VAT on all imports, most importantly on overseas service and management charges, which are used by offshore companies to avoid UK corporate taxes. VAT would also be imposed on all food imports, including the over-pricing of commodities by multi-nationals, which is also used to avoid taxation, and on meat. This would be a disincentive to the long distance transfer of foodstuffs (and animals)and encourage more local production, upon which VAT would not be charged. It is also likely to reduce meat consumption, in favour of locally produced vegetables.
3. Stop VAT on imports being recoverable. This would undoubtedly increase the cost of imports, but it is likely that:
(a) it would be an incentive to produce more goods and services locally in the UK and reduce the record levels of imports, now running at £582bn a year;
(b) it would be allowable as a business expense, thus being partially mitigated for importers by a reduced corporation tax bill (if they pay their taxes);
(c) competition would encourage importers not to pass on all of the extra costs to their customers, to avoid being priced out of the market;
(d) the extra cost to consumers for imports would encourage people to prefer locally sourced goods and services;
(e) the extra cost to consumers would be more than mitigated by the overall reduction in VAT on ALL their purchases, both imports and locally sourced;
(f) be a major disincentive for tax avoidance using charging for "fictitious" overseas services, such as management costs or over-priced commodities.
(g) it would, at current rates, bring in an additional £80bn+ in revenue to the UK treasury, which could be used to improve the NHS and social care;
(h) it is likely to reduce consumption overall, as part of a "de-growth" economic strategy, which was recommended for economically developed countries,after the 2013 climate change talks in Warsaw.
Such a change would challenge EU rules and would probably flout World Trade Organisation (WTO) rules as well. But it would be in line with the Green Leaves proposal to shun all free trade agreements, like TTIP and CETA.
However, it is also likely that retaliatory action might be taken by other countries, in the form of tariffs on UK exports, but as imports to the UK outweigh exports from the UK, this is something that can be negotiated favourably on a bilateral basis with each country or trading bloc, particularly the EU, whose exports to the UK are already £70bn more than the imports from the UK.