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Thursday, 12 April 2012

How to Change Our Country

I was asked recently what we should do to improve our current situation by someone who agrees with the comments I have made throughout this blog. Not being one to shy away from controversy or responsibility, I have tried to set out below some ideas that would allow the UK to become a more egalitarian country; socially, politically and economically. Hopefully these ideas would allow everyone to enjoy the benefits of what is supposed to be a rich economy while encouraging individuals to take personal responsibility and contribute to society in a myriad of ways. Of course these ideas are just a start, perhaps the re-nationalisation of certain key industries will move us forward, or a legislated protectionist role for our national media (assuming we can design appropriate safeguards). The point is we need to move the agenda toward a model which favours us all. Naomi Klein noted the Chicago boys ethos of keeping an idea alive until the politically impossible becomes the politically inevitable. Now it’s our turn to change the landscape.

1.      Legislate to ensure that CEO's, executives and shareholders are not allowed to earn more than 50 times more than their lowest paid employee (pro-rata).
In an article from the Guardian, they note that average UK full time salaries decreased by 3.5% during 2011 and part-time equivalents fell by 11.2% (both in real terms). Meanwhile the article goes on to quote that executive pay increased by 15% and the pay of corporate managers also went up by 7.2% on average. The economic context for these changes were of high (5% on average) CPI inflation, and low economic growth (roughly 0.5%). In short, the article alludes to class war with low skilled workers suffering a reduction in their standards of living, which appears to fund the growth in the salaries of those they are responsible to. Despite the lack of growth in the economy, the managerial classes have been paid far beyond the contributions they have made while low skilled workers suffer by comparison, I guess we’re not all in it together. National Minimum wage increased by 2.5% in 2011 however this reflects an actual wage cut when considered against average inflation of above 4%. Indeed the 22% increase in minimum wage between 1999 and 2010 looks reasonable until we consider that this works out at less than 2% per year. Indeed, in only 3 of twelve years has national minimum wage outstripped RPI inflation or conversely, in nine out of the last twelve years the UK’s lowest paid workers have effectively received wage cuts. Meanwhile, as Ed Miliband noted in his speech to the TUC in September 2011, CEO pay has quadrupled during the same time period.

Even when the economy is growing it is clear that only the already rich are benefitting, and when times are hard the low paid are asked to bear the brunt. This results in a rapidly increasing income gap which has grown faster in the UK since the 1970’s than in any other rich nation. The idea of the movement away from collective bargaining and privatisation since the 1980’s has been that we might all get a smaller slice of the cake, but the cake will be bigger and thus through trickle-down economics we all benefit by getting more overall. This is patently untrue, as Barrack Obama recently noted when he stated that trickle-down economics has stopped working. Fundamentally, we have to ensure that everyone in our economy benefits from growth that we all create. By limiting the pay of the highest earners within an organisation to 50 times that of the lowest earner (pro-rata), maximum pay would be just over an entirely reasonable £500,000 for any business that employs people on minimum wage terms. Currently the average salary of a CEO within a FTSE 100 company is £2.7m, if we limit the salary depending on wage increases for the lowest earners, just watch average pay go up!

2.      Reform political funding to stop business and Trade Union donations. Publicly fund all parties. Let's stop public officials benefitting privately or politically from making public decisions.
Cameron’s [alleged] sale of dinner for £250,000 a time has many things in common with Blair’s [alleged] sale of honours. Both play to the vanity of potential donors, Cameron allowing them access to the PM and Blair’s; titles and possibly office. Both are devices which potentially use the trappings of office to generate money for the incumbent political party and if that had been proven in anything beyond common sense terms, would be deemed illegal. Most importantly however both can provide political power to the unelected. If Blair, gave peerages, he offered donors position directly and with it not inconsiderable power. While Cameron’s [alleged] approach, circumvents the need to provide high profile appointments by giving access to policy central itself. In either case those who can afford to make large donations may have effectively bought the ability to influence political decisions that should be made in the public interest. In short, allowing this situation to endure is undemocratic and corrupt. The money itself we are told – and these are considerable sums - the Conservative Party has received £159,484,285.40 since Cameron became leader according to DR. Eoin Clarke - is needed for political campaigning and the running of the party in general. Much of the money seems to be spent on vulgar ad campaigns however, that inform us through Bill Boards just how incompetent, inefficient or misguided the purchasing party’s competitors actually are. They say very little about the policies that parties plan to implement and even less about how they plan to implement them.

So then, what we probably have is a situation where large donations to political parties are used by those with the means to purchase a seat at the decision makers table and with it a chance to directly affect decisions which should be made in the public interest. The money that this generates for political parties is then used to criticise their competition. This should all be banned. Political parties do not need to campaign negatively, and should not even have the opportunity to allow donors to bypass the democratic process. Therefore, each MP elected should have attached to them a small amount for positive campaigning and administrative expenses. Parties and individuals must be forced to operate within this budget and to ensure that this can happen air-time should be provided for debates in the national free to air broadcasting media. Any donations to political parties should be against the law.

3.      Outlaw negative political campaigning and demand that parties publish manifestoes which explain the measures that will be used to action their policies. Any lies in these documents should lead to a General Election and prosecution.
While we are on the subject of political campaigns, I do not want to know why Cameron thinks I shouldn’t vote for labour, or why Miliband thinks we should boycott the Liberal Democrats. They are obviously biased and thus their thoughts on each other are not a sound basis for any of us to make a decision. The only sound basis in fact for a decision is a clear breakdown of each party’s policies and clear description of how these would be implemented. For example, the Conservative Manifesto unformed us that should they be elected there would be no further ‘Top-Down’ reorganisations of the NHS. I don’t want to know what they won’t do, I wanted them to tell me that they planned to turn the NHS into a franchise where private companies would produce all of their services at a significant profit. I wanted to know that a company (McKinsey) who were already advising the party would benefit substantially from the non-described reforms and yet were being given an architect’s role in devising them.

Of course, had Cameron published the idea clearly, or told us that by “opening up education to competition” he actually meant privatising schools, no one would have voted for him. If we want politicians to be honest about what they are going to do, and then do what we vote for we have to be able to hold them to account. Therefore, all policies should be published - including steps required for implementation - prior to the election. Politicians should only be allowed to discuss their own policies and why they expect them to work during campaigning, making no reference to the competing policies of other parties. If a single policy is changed in substance or implementation once a party has been elected, a new General Election should be triggered, and the full cabinet jailed!
4.      Limit the size of business organisations and make executives and shareholders legally responsible for their actions.
The size of the Royal Bank of Scotland’s balance sheet is estimated at £1.4tn and this is not even close to being one of the world's largest companies. To provide a little context, the size of the UK economy is estimated at £1.4tn, roughly the same size as the RBS balance sheert, and less than the £1.5tn that HSBC commands. Ever wonder why bankers are so powerful? Because they threaten to take their huge businesses elsewhere unless they get the laws they want, the tax breaks they want and the concessions they want. For example HSBC employs almost 170,000 people, Tesco – 240,000. Now these businesses are not just going to move somewhere else, the size of their businesses is down to the effectiveness of the labour they have found in our service based economy. However, each time they lay off employees it causes massive problems for UK governments who have to deal with headlines concerning rising UK unemployment or falling economic growth - thus, they don’t take the chance, nor do they risk losing possible donations from the cash rich organisations. Generally they do as they are told and that is why our banks became too big to fail, it is why 1 in every £8 spent in the UK is spent in Tesco and it is why Nissan get over £50m per year in tax breaks to locate here.
No business should be able to dictate policy to national governments. This is destructive to democracy and contrary to the public good. Therefore, any business with more than 25,000 employees or 15% of a market should be forced to divest parts of itself until it no longer has the ability to dominate its market or the politics of its host country. Unless large businesses accede to these laws they will be forbidden from operating in this country and all of their assets seized by the government. Additionally, we need to force boards of directors and shareholders to take legal accountability for the actions of their corporations and remove the veil of limited liability that “business leaders” hide behind when things go wrong. Wouldn’t it have been nice to see senior bankers go to jail when the deals they made undermined the global economy and lowered all of our standards of living.
5.     Legislate for a maximum 35 hour working week and enforce it.

Despite being the second largest economy in the EU, Britain has the third longest working week (on average 42.7 hours). Before you link this to the “success of our economy please note that we work considerably longer hours than Germany, the EU’s largest economy, but less than Greece, so clearly long working hours are not a pre-requisite for economics success. As ABC News have noted, large corporations are hoarding stockpiles of cash and not recruiting employees for expansion due to the difficult economic times.
Meanwhile, The Office for National Statistics reports that there are over two million single parent families in the UK with 26% of children raised in single parent households. Conversely, only 2.2 million children have the luxury of a stay at home parent according to the BBC meaning three quarters do not have a parent at home to look after them. The UK still has the highest teen pregnancy rates in Europe, knife crime is at epidemic proportions and as the Telegraph notes,  teen drinking in the UK is among the worst in the world. The BBC highlights that children left alone tend to do less homework, drink more alcohol and are more likely to get themselves into inappropriate sexual situations. Let’s give parents the chance to parent, and children the chance to be children with the appropriate role-models, guidance and support. Let’s get more people into jobs and improve the work life balance in the UK. Let’s make sure adults have the opportunity to take an interest and an active role in society. All of this is possible with more stringent and effectively enforced working week rules. Please note, I do not advocate a return to the over idealised 1950’s housewife model. Feminism has been a force for good, but families should have the option to choose a work / family balance that benefits them.
In economic terms this would benefit us as a country since we would be forcing corporations to employ more people reducing unemployment and thereby put more money into the hands of working people. This would increase the demand for goods and services within the economy and lead to a virtuous circle of increasing growth, income and confidence. For example the increase in income tax alone would help to reduce the deficit in the government coffers.

·         Considering the EU
I do not say this lightly, but given European law the UK would need to withdraw from the EU, at least temporarily in order to make the above changes since EU law over-rides UK law. I passionately believe in the philosophy of the social, political and economic integration that the EU represents, however in order to make these reforms stick and protect our economy as they do so, we would need some protectionist policies in place. The EU is a noble experiment, but it assumes that the countries involved are socially, politically and economically ready to homogenise laws and what is good for one will be good for all. This is patently not the case since EU law currently provides a significant barrier to the necessary reforms that have been highlighted above.


  1. PART 1:

    I find your proposals, and I say this as a member of the left, not particularly credible or well-thought through.

    1) Cap top pay at 50x salary
    I did some maths and this means that no company that employs anyone on the minimum wage can earn no more than approx £600,000. Which in of it self looks absurd.
    -Some companies (and it will only be the biggest companies) have huge operations and employ vast amounts of people. People who are paid to manage a big region, say the entirety of Europe, should be able to be paid commensurate to their responsibilities?
    -Is there any difference between companies based on the number of people they employ? It would appear not. So hiring 1 person on the wrong wage makes others illegal?
    -If I want to pay the boss the salary I want to, and I was considering offering some low-paid jobs which weren't 100% necessary but might help things along, you're saying that it is right that the incentive should be to discourage the use of low-skilled labour?
    -Why 50 times and not 60, 40 or 80 times? Why is an arbitrary cap ever a good idea?

    2) State funded parties.
    Actually I agree with this idea, I think voters should be allowed to allocate on their tax form a small amount to a political fund as in the US to fund all parties. I don't agree that donations should be banned however - a cap is a fairer way of preventing 'big money'.

    3) Ban negative campaigning, make 'lies' illegal in Manifestos
    I can tell you 100% involved in campaigns that bans on negative campaigning lead to candidates floating all sorts of silly assertions, but these can't be challenged because their opponents are prohibited from asking probing questions or saying don't vote for this candidate because of policy x. Banning negative campaigning is cotton-wool politics.
    Making lies illegal is also silly and misguided because politicians rarely ever lie (those that do tend to go to jail). Instead they tend to omit key qualifiers or assumptions, and peg their policies with tiny smallprint in the same way banks do. Politicians never lie, they only ever don't tell you the whole truth.
    Eg "Mr Cameron will you reform the NHS?" "At this time, I have no plans to reform the NHS". *few months later* "Mr Cameron, you said you had no plans to reform the NHS. But now you're unveiling the biggest changes ever?!?" "Well, at the time I said that I had no plans. But at this time I now do." etc etc etc

    1. I have no problem with people being paid commensurate with their responsibilities, e.g. managing the entirety of Europe. But words like 'responsibility' are misused. Firstly, anyone who manages such a region has a pyramid of workers 'below' them, all of whom are shouldering responsibility, for which they should be paid appropriately. Responsibility does not float magically at the top. Secondly, responsibility is not the same as power, but is often interpreted as such. Responsibility means being obliged to try to make the right decisions, and copping the negative consequences as well as the positive. Many CEOs are rewarded and exonerated for appalling irresponsible behaviour.

  2. 1) I'd say rather than cap the salary of the top earners, require that it be linked directly to those at the bottom. That way, if management, directors etc. want a pay rise, they would be legally compelled to raise the salary of those below them.

    2) Agree, although, like Charles, I'd say you want to cap donations (many companies already get around laws on corporate donations by passing through an individual)

    3) You can't ban negative campaigning because so much time and energy would be spent arguing over whether something a party said constituted negative campaigning, even if it's a demonstrable fact. If Labour, for instance, were to point out that there are now nearly 3 million people unemployed, the Tories could counter that Labour are going negative by simply stating a rather depressing fact. Similarly, making party manifestos legally binding would result in two things; a) manifestos filled with vague and meaningless amounts of bugger all that say nothing whatsoever, and b) governments and opposition parties spending a fortune on lawyers

    4) There are laws and bodies that exist already to control this, to an extent (Monopolies and Mergers Commission, for example), but they're largely toothless and corporations employ entire legal teams to find loopholes to get around such legislation. If your aim is to reduce or eliminate the political influence large companies wield, capping political donations would probably do more good. As for making executives and shareholders responsible for their actions, I'd go for that, although trying to get the shareholders to bear the blame could get complicated when they number in the hundreds or thousands (companies would be afraid to make decisions without a shareholder vote on everything, and that could be crippling). Not sure what the solution is to that one.

    5) Fine by me

    All in all, some good ideas ...

  3. Just think the fact different parties exist will always be the problem. It gives blame avenues to be diverted where the public should nail wrongs to the wall. We dont need a manifesto which can become dated within days we just need a voice and then make the people in charge do as we say or at very least we make them accountable/sacked.