2015 march prem_sikka_morning_star_conferece_presentation

Morning Star Conference – 1 March 2015

“HOW TO FIGHT AUSTERITY”

Prem Sikka ([email protected])

Centre for Global Accountability, University of Essex, UK

Director, Association for Accountancy & Business Affairs (aabaglobal.org)

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•Almost Permanent Austerity

•Systematic erosion of normal people’s purchasing power and dignity

•Organised Humiliation of Normal People•Corporate Welfare programme•Predatory Capitalism•Political System ignores the concerns of normal people.

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Organised Humiliation of Normal People

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Shrinking share of GDP

•1976: Wages and Salaries 65.1% of GDP

•2014: 53/54%

•2020: less than 50%?

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•Low Pay and Insecurity•5.3 million paid less than the living wage•700,000 on zero contract hours (casual labour). TUC says much higher•250,000 workers denied the minimum wage•13 million live below the poverty line – rise of the working poor•Gender pay gap•Legalised age discrimination – not even minimum wage for the under 20

•Ian Duncan Smith – Anyone can live on £7 a day. Malcolm Rifkind can’t live on £60,000

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•Rising income/wealth inequalities

•Wealth of the richest 1% = combined total held by the poorest 55% of the population.

•Top 10% have 44% of all household wealth

•Poorest 50% muster 9% of total wealth.

•UK workers have experienced the biggest real-term drop in their living standards since the mid-19th century

•2014: Wealth of the richest 1,000 people increased by 15.4% to £519 billion.

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•Low Pensions•Demise of the final salary pension schemes•Poorly paid workers can’t provide for pension•UK state pension is low

•Italy: 70% of earnings•France: 50%•Australia: 50%•UK: 32.6%•Mexico: 28.5%

•UK Retirement Age raised whilst elites retire early with massive pensions

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•Pension Tax Relief

•Tax relief on pension contributions is worth £34.8bn a year. To put this into perspective, the budget for NHS England is around £95bn, while the total spend by the military is around £33bn.

•70% of that £34.8bn in tax relief is taken by higher or top rate taxpayers.

•Reduce tax relief to basic rate of 20% for all up to a maximum pension pot of say £1m. Savings = £10-£15bn?

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•Loss of free university education

•Life of debt for students and their families

•Labour introduced fees in 1998 - £1000

•2014 – Average about £9,000

•Miliband: reduce it to £6,000

•Scotland: free higher education

•Germany: Abolished university fees

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Regressive Taxation

•1979- Poorest 10%paid 35% of income in direct/indirect taxes; richest 10% -37%

•1997 – Poorest 10% paid 44% of income in direct/indirect taxes; richest 10% - 34%

•2010 - Poorest 10% paid 43% of income in direct/indirect taxes; richest 10% - 33%

•2014 - Poorest 10% paid 47% of income in direct/indirect taxes; richest 10% - 35%

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•Systematic weakening of workers’ rights•1980: 80% of workers covered by collective bargaining agreements; 2014: 25%•Trade union membership – 1980, 13 million; 2014, 6 million•2014: fees to take cases to employment tribunals

•Redundancy consultation period to be reduced from 90 to 45 days for 100 redundancies

•Less than 20 staff: no consultation is necessary

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•Economic recovery based on personal debt

•The highest personal debt (about £1.4 trillion), the highest per capita in the EU.•Government is banking on £2.15 trillion

•Haven for payday lenders

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A SOMETHING FOR NOTHING SOCIETY:

CORPORATE WELFARE

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•Contrary to neoliberal claims, the state has not been rolled-back. State power used to create private monopolies – gas, water, electricity (profiteering).

•The state guarantees corporate profits and transfer wealth upwards

•Govt outsourcing at a round £88bn a year.•£85bn a year in grants, subsidies, insurance schemes, preferential credit and government services (Kevin Farnsworth research)

•Little specific information – hidden behind cloak of confidentiality 14


•Bank Bailout: Now creative Accounting•Oct 2014: Public sector net debt excluding public sector banks (PSND ex) was £1,449.2 billion (79.5 % of GDP).•October 2014: Public sector net debt including public sector banks (PSND) was £2,285.3 billion (125.8% of GDP). This figure has now been revised down to £1,763.0 billion (97.0% of GDP), a decrease of £522.3 billion, primarily due to the re-classification of LBG to the private sector•Quantitative Easing - £375 billion

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•In 2012, the European Union provided €83bn (£70bn) in support of agricultural producers, about 19% of the total farm receipts. Over the years Tate & Lyle has received €830m even though it does not own any farms. Nestle has collected €93m. Others include Haribo, the sweet manufacturer; Groupe Doux, a French chicken processor, which does not raise poultry; Coca-Cola, the Duke of Westminster, the UK Royal family and the Catholic Church.

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•G4S could not provide security for the London Olympics

•Private companies running prisons

•Serco received £2bn of taxpayer funded contracts. The company has been accused of charging the taxpayer for electronically tagging offenders who were dead or in prison. The Serious Fraud Office is examining the claims

•SERCO could not provide out of office cover for GPs in Cornwall

•Private Academies17


•Railway Companies: £4-5 billion subsidy for each year since privatisation

•BP, Chevron, ConocoPhillips, ExxonMobil and Shell: In the last decade, they made profits of nearly $1 trillion, but demand subsidies for drilling for oil and gas in North sea. The industry probably picked a subsidy of $6.8bn (£4.25bn) in 2011•BT has annual turnover of £18 billion and profits of £2.5bn, but received a government subsidy of £1.2bn to install broadband for rural areas.

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•Atos has been severely criticised for its handling of the £500m project for carrying out "fitness to work" tests on disabled benefits claimants, and had to be removed. Soon, it received another public contract to extract patient records from GP surgeries for the NHS data sharing scheme.

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•EDF and its partners are set to receive £17.6billion subsidy for building a nuclear power plant to generate electricity even though this investment is projected to provide a return of up to 21%

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•PFI: Capital value £55bn. The government is committed to repaying £301bn, a guaranteed profit of £247bn

•Some PFI contracts moved to tax havens so the companies won’t pay UK corporate taxes.

•Walt Disney Corporation collected a subsidy of £16.6m for making parts of Captain America, Thor, and Guardians of the Galaxy in the UK. The film receipts go to Disney. Since 2007 - £137 million (Kevin Farnsworth)

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•With 13million people living below the poverty line, many on low wages and lengthening queues at food banks, most Britons can only dream about buying a sporty car. •Lotus, the sports car manufacturer, has received £10billion subsidy. •And in case someone on minimum wages gets fed-up with Lotus they can always try their hand at a Porsche where the price of a £90,000 model is reduced by £5,000, thanks to a government subsidy.

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•Tax Avoidance/Evasion is rife

•HMRC: Tax gap - £34 billion a year (6.8% of total tax liabilities)

•Other estimates - £120 billion a year

•No action against HSBC, PwC or any other corporation

•Corp tax rate reduced form 52% (1979) to 20%, but no let-up in tax avoidance.

•Social security benefits: £164 billion, fraud £1.7bn (0.7%). 2012/13: 9.836 prosecutions

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•Boots generates about 40% of its UK revenues by processing NHS prescriptions•Following a buy-out, the company shifted its headquarters from Nottingham to the Swiss canton of Zug. •The buy-out was financed by a debt of £9bn. •The debt bought a global business, but has mostly been left in the UK•The UK government gives tax relief on interest payments even though the debt is not entirely used in the UK. •This has enabled Boots to reduce its UK taxable income by £4.2bn from 2007 to 2013 and lower its tax payments by nearly £1bn. •The UK government could change the rules so the level of tax relief is restricted to the amount of debt relevant to the UK business, but has not done so. 24


PREDATORY CAPITALISM

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•Since the 1970s

•Privatisations (public is bad, private is good – HSBC, banking sleaze)

•Strive to meet market profit expectations

•Must declare higher profits

•Profit related pay

•CEO tenure is less than 5 years

•Profits cooked

•No personal consequences

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•Banks have been serial offenders

•Accountancy firms are the epicentre of global tax avoidance

•Fake supermarket sales

•Tesco accounting

•Rip-off practices by train, gas, water, electricity, phone companies

•Price comparison websites cheat customers

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•No industrial democracy (unlike Scandinavian countries)

•Directors cast thousands of proxy votes

•Shareholder model of corporations has failed.

•The UK Parliamentary Commission on Banking Standards concluded that “shareholders failed to control risk-taking in banks, and indeed were criticising some for excessive conservatism” (UK Parliamentary Commission on Banking Standards, 2013)

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•The Banking Standards Commission has urged the government to consult on a proposal to amend section 172 of the Companies Act 2006 to remove shareholder primacy in respect of banks, requiring directors of banks to ensure the financial safety and soundness of the company ahead of the interests of its members (UK Parliamentary Commission on Banking Standards, 2013).

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•Political System ignores the concerns of normal people.•Political parties for sale to the highest bidder•MPs- Cash for access•Corporations provide money/jobs for former and potential ministers•House of Lords: buy political patronage•General election: few seats decide the outcome.•Government promote economic religion – markets, private interests and have no reflections on failures•All policies designed to appease financial markets

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•The challenge:

•Promote alternative policies

•Enrol younger people into politics

•Empower women

•Challenge conventional wisdoms

•Give people something to vote for – The Scottish referendum example

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THANK YOU

ANY QUESTIONS?

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