From the TUC

Public spending cuts: FT acknowledges CBI dilemma

29 Sep 2009, by Guest in Politics

Good to see the Financial Times agreeing with me that the CBI is very uncomfortable with all the talk of rapid and deep cuts.

A case of Thatcherite ideology butting up against economic realities.  Maybe the Tories would share the discomfort if it was their business or job facing the axe.

2 Responses to Public spending cuts: FT acknowledges CBI dilemma

  1. Ian Greenwood
    Sep 30th 2009, 5:25 pm


    What’s wrong with public spending cuts?

    What’s wrong with austerity?

    It would be Keynesian to Invest in super-insulation, and later Sustainable Transport.

    As has been said elsewhere, we could get down to the required level of consumption by 4 % reduction each year for 2 decades. Certainly 10% property inflation for the last 2 decades has caused concealed inflation as Globalisation helped keep RPI and CPI down. Now we need to do the opposite, here’s a summary:

  2. Ian Greenwood
    Sep 30th 2009, 5:35 pm

    FROM THE EXISTING HIGH-PRESSURE WORLD of finance, it would surely be desirable to have a mechanism for automatic diversion of part of commercially-created money if it could be for anti-inflationaryFNote1, long-term climate protection needs .

    The credit creation system offers the perfect opportunity, now that instability issues are being discussed. So a credit creation charge might be a timely way to achieve a stabilising flow of revenue from the top-heavy, most-profitable world of high finance( FootNote 2). We would then need a mechanism for efficient distribution, suggested below – fairly funding projects directly.

    In Australia and Canada the GST is at 10%. In the UK VAT has been brought down to 15%. But none of these countries have a mechanism that allocates ring-fenced funds against climate change. Meanwhile congestion caused by cars has declined little since the credit crunch. They are still using up the limited fossil fuels that China and India will soon be even more rapidly eating into. And sea levels will more rapidly rise.

    So energy transition and climate change adaptation measures could both be massively assisted by the simple means suggested below. Part of it has already got muted praise from Whitehall and by the Bank of England. Earlier STEER (ETI) was supported as an option by the Earth Policy Institute in the USA – a lead author in Earth from the Air (!) photos that brought matters sharply into focus. For example the decline in value of trade received from increased volumes for those bottom 50 countries with weak currencies (50% drop in value 1990-2000). This started me in my search for solutions to currency value problems that could attend to climate. I hope you too will find them good , look up the documents and forward this/comment.

    We have embarked on a book that must be out soon, hopefully a short TV series to follow. In it we are describing how currency value has been at the heart of a series of global problems: from global terrorism to inadequate protection of the agricultural and other land turning to desert, to our own starvation of funds that should have automatically gone towards infrastructure costs (otherwise increasing taxation) that would protect the roads from congestion.

    The ordinary man, the business man or woman and the teenager struggling to make sense of the world will read this book! So should government, policymakers and academics! It offers the mechanism by which the Green New Deal can be helped to reality instead of another forgotten report. In it we will show that a simple diversion (charging at the base rate of interest for any new money) amounts to a lot less than half of currently-created credit money that has been and will be a source of extreme profit to banks. This can be used to assist the introduction of an ETI or ET tax (see below) a fundamental alteration to the means of distribution. Each year would add a similar increment – levelling out after all new money loans were charged for.

    By making the money flow automatically and ADJUSTABLY to investments, rather than consumption (direct to projects and with an equal return to projects in producer nations) rather than through government or bureaucracy, we may have the magic bullet partially described above, to help everyone including banks, insurers, re-insurers and EMPLOYERS/EES.

    Briefly put, the VAT would be brought further down to 10% and the EET or ETI brought in alongside at 10%. The offset needed to protect the vulnerable from the effects of that tax (amounting to 2.5% net increase in UK) would be diverted from banking as mentioned in the first few lines above to help simplify the myriad of taxes: by sending the base rate on any new money to the public purse via the Central Bank. The new diversion would help the implementation of a ‘dream agreement’ for Copenhagen and allow fast-tracking of Building Make-overs – energy enveloping and energy detailing – in the UK.

    Such a measure would have the effect of moderating PFI.

    Contact Ian.Greenwood +44 (0)121 449 0278 STEERglobal Gp

    Footnote 1 “Long-term investments can be less inflationary” Central Planning Economic section official (Netherlands), Dr Nick Zubanov. Email note.

    Footnote 2. In a recent paper by the ACCA accounting group (the one with ethics as a core principle) McKinsey are quoted to have found that “global banking profits in 2006 were $788 billion; this was over $150 billion greater than the next most profitable sector: oil, gas and coal. Global banking revenues were 6% of global GDP and its profits per employee were 26 times higher than the average of other industries.” (Corporate Governance and the Credit Crunch ACCA 2008) (Our emphasis – these profits are after high expenses. “Fascinating” way credit money arises entirely for commercial banks shown here:

    3. New Economics Foundation et al (2008) [NEF said any credit creation charge should be hypothecated].
    4. Environmental Tax on Imports published as part of Stern Review and Treasury Select Committee 2007/14 found some favour in the Cabinet Office and the Stern Review by suggesting an automatic return to producer nations direct to sustainability projects.
    5. EET previously described as Environmental Tax on Imports (ETI) might be renamed the Environment and Energy Tax (EET) and ring-fenced for renewable energy, sustainable transport and super-insulation etc. In earlier papers the proposed credit creation charge was termed a Credit Money Banking Adjustment (CMBA). The advantage of such an adjustment would be automatic governance of some of the finance excesses without interference.